Save cash as the minister scraps retirement fund tax

Karin Johansson

Karin Johansson

Thanks to yet another record tax revenue collection over the past year, Finance Minister Trevor Manuel yesterday announced a number of tax relief measures to help boost a culture of saving, promote entrepreneurship and support economic growth.

"This year, individuals benefit from moderate personal income tax cuts and the elimination of the retirement fund tax. Business benefits from reforms to the secondary tax on companies. We extend accelerated depreciation allowances to certain infrastructure and the cost of corporate reorganisation is reduced," said Manuel.

People younger than 65 earning below R43000 will not pay any income tax, up from R40000 in 2006, and personal income tax brackets have also been adjusted to compensate for the negative effect of inflation on taxpayers, and to partially offset the effects of changes to tax on medical aid contributions and car allowances.

"I appeal to taxpayers to use this relief to first settle their debts or save, rather than for consumption," said Manuel.

South Africa's debt levels have started to reach worrying proportions and currently sit at about 68% of household income.

In an effort to promote saving for retirement, the National Treasury has proposed the abolition of the retirement fund tax from March 1.

"We call on trustees to ensure benefits of this reform accrue to contributors and beneficiaries of retirement funds. The proposal will cost R3-billion a year and is part of a number of related measures aimed at encouraging household savings," said Manuel.

To the disappointment of home buyers, the 2007/08 Budget made no mention of an easing in transfer duties, which means these will remain unchanged.