Sanlam : The Aspects that Impact Financial Planners

Estate Duty

Estate duty is levied at a rate of 20%. However, estate duty for estates worth R30 million and more has been increased from 20% to 25%. This will be effective from 1 March 2018.

Donations tax

The donations tax exemption for natural persons remains R100 000 p.a. Donations exceeding R100 000 p.a. are taxed at 20%. However, any donations above R30 million in one tax year will be taxed at 25%.

Interest

The interest exemption remains the same for interest earned from a South African source for both individuals under, and over the age of 65. The interest exemption for non-residents remains intact.

Medical tax credits

Medical tax credits will increase from R303 to R310 per month for the first two beneficiaries, and from R204 to R209 per month for the remaining beneficiaries. The calculation of the deduction in respect of individuals over the age of 65, disabled individuals, as well as all other individuals, remains unchanged.

The medical tax credit consists of two components namely, medical scheme fees for approved medical scheme contributions and additional medical expenses for out-of- pocket medical payments. There are instances where multiple taxpayers contribute toward the medical scheme or expenses of another person (for example, adult children jointly contributing to their elderly mother's medical scheme). Where taxpayers carry a share of the medical scheme, contribution or medical cost, it is proposed that the medical tax credit should also be apportioned between the various contributors.

Tax treatment of contributions to retirement funds situated outside South Africa

The Income Tax Act currently exempts all retirement benefits from a foreign source for employment rendered outside of South Africa from taxation. The interaction of this exemption with double taxation agreements and other provisions of the Act will be reviewed to ensure that contributions are only deductible where benefits are taxable.

Align tax treatment of preservation funds upon emigration

Upon formal emigration an individual is able to withdraw the full fund interest from a retirement annuity fund, after paying the retirement fund withdrawal benefits tax. Government will consider changing the laws this year to allow a withdrawal upon emigration for preservation funds as well, in other words in addition to the current one allowed withdrawal from a preservation fund.