On 22 February 2012 the Minister of Finance Pravin Gordhan delivered the annual budget speech and made some notable changes to the tax payable regarding the property industry.
As from 1 March 2012 the inclusion rate for capital gains tax will be increased as follows:
1. From 20% to 33.3% for individuals, resulting in the increase of the effective tax rate from 10% to 13.3% as a maximum effective rate for individuals;
2. From 50% to 66.6% for companies, resulting in the increase of the effective tax rate from 14% to 18.6%;
3. From 50% to 66.6% for trusts, resulting in the increase of the effective tax rate from 20% to 26.7%.
The above changes are illustrated in the below table:
TAX PAYER
INCLUSION RATE
STATUTORY RATE
EFFECTIVE TAX RATE
Individuals
33.3%
0 - 40%
0 – 13.3%
Companies
66.6%
28%
18.6%
Trusts
66.6%
40%
26.7%
On the other side of the coin there were changes made in regard to the exclusions for capital gains tax that apply to individuals, which are as follows:
1. The annual exclusion has been raised from R20,000.00 to R30,000.00;
2. The exclusive amount on death increased from R200,000.00 to R300,000.00;
3. The primary residence exclusion has increased from 1,5 million to 2 million.
The other notable change was the increase in dividends tax from 10% to 15%, effective from 1 April 2012. This will affect property owning companies and close corporations when selling their assets and distributing the proceeds to its shareholders/members.
Information Supplied by THE DYKES VAN HEERDEN GROUP.
