Finance Minister Pravin Gordhan proposed personal income tax relief of R9.5bn in his budget speech on Wednesday – a modest real tax relief.
“To ensure that the direct personal income tax burden on individuals remains reasonable, personal income tax brackets and rebates are adjusted to take account of inflation or 'bracket creep', as well as provide limited real tax relief,” Gordhan said.
As of 1 March 2012, a tax credit for those who contribute to a medical aid scheme will be introduced. Those contributing to a medical scheme will be given a credit of R230 per month for the first two beneficiaries and R154 for any additional beneficiary.
“Taxpayers 65 years and older and people with disabilities will be included in the second phase of this reform, which will be implemented in 2014,” Gordhan said.
These reforms will significantly improve the fairness of the personal income tax system.”
Gordhan added that the government is currently considering the way contributions to retirement funds are taxed and any of these changes will take effect in 2014.
“To encourage voluntary savings, consideration is being given to the introduction of tax-exempt short and medium-term savings products,” he said.
“The proposal is that individuals should be permitted to save up to R30 000 a year, with a lifetime limit of R500 000, in registered savings or investment products that would be free of tax on interest, dividends or capital gains.”
For more on the 2012 budget – head over to the Justmoney.co.za Budget Page – brought to you by Sanlam.