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Press release: FISA comment on the National Budget

193Please see the below commentary by Louis van Vuren following the National Budget on 25 February 2015.

FISA comment on National Budget 2015

Closing down the abuse of retirement annuity contributions to avoid estate duty

In a budget with few surprises the Minister of Finance announced several tax increases and measures to prevent tax leakage.

From an estate planning perspective, the tax rate for trusts is increased from 40% to 41%, while the corporate tax rate of 28% remains unchanged.

A popular scheme to avoid estate duty will be stopped.  This scheme made use of a change in the Estate Duty Act[1] in 2008 which had the effect that lump sums from retirement funds were no longer subject to estate duty.  As a result some individuals transferred large capital sums into retirement annuity funds as part of their estate planning.  This had the effect that most of the proceeds of the retirement annuity after the death of the member would pass from the deceased to the beneficiaries without any tax being paid.  In a partial reversal of the 2008 amendment, the Minister announced that any such contribution, that was not tax deductible in the year it was made and would therefore be available as an income tax free lump sum upon the death of the member, will in future be included in the estate of the deceased member for estate duty purposes and potentially attract estate duty of 20%.

The usual and expected increase in sin taxes was quite mild, with the increases in line with the long term average inflation rate or within a few percentage points of that.

The bulk of the increase in tax revenue comes from an increase in personal income tax.  Despite the usual adjustment of tax brackets to allow for the effect of inflation, the 1% increase in income tax rates for everyone with a taxable income of more than R181,900 means that the actual tax burden in real terms for these taxpayers will increase by at least 3%, taking this out of  their disposable income after allowing for the effect of inflation.

A taxpayer with a taxable income of R400,000 in 2014/15 who receives a 6% salary increase in 2015 (or R2,000 per month), will pay R701.45 per month more income tax, thereby more than negating the adjustment in the tax brackets to compensate for inflation.  If a taxpayer had a taxable income of R1m in 2014/15 and also received an increase of 6% (R5,000 per month) the increase in income tax will be R2,429 per month.  This does not take the welcome increase in medical tax credits into consideration, which increase should be almost tax neutral as it is just under an inflation adjustment.

Added to this comes an additional R10 per month for the average middleclass household for the increased electricity levy and a further R65 per month for the average commuter as a result of the increase in the fuel levy.

On the positive side, the transfer duty on a house bought for R1m will decrease from R12,000 (1.2%) to R7,500 (0.75%),  and from R77,000 (3.85%) to R65,000 (3.25%) on a house of R2m.

The turnover tax for micro-businesses was also reduced, with these businesses now only becoming taxable at a turnover of R335,000 and not R150,000, and the top tax rate being dropped from 6% at a turnover over R750,000 to 3% at the same level.  The cap for these businesses remain a turnover of R1m.

Medical tax credits will be available now also for provisional tax payers, where it has been limited to employees previously.

The impact of the tax increases on disposable income is likely to place a damper on consumer spending and economic growth.


Person to be quoted and contact: Louis van Vuren, recently appointed CEO of FISA, 082 451 3293, or

About FISA

The Fiduciary Institute of Southern Africa (FISA) is a non-profit organisation that represents fiduciary practitioners and sets high minimum standards for the industry to protect the public’s interests. FISA is the only professional body focusing solely on fiduciary practitioners in Southern Africa.

 Activities of FISA members include, but are not restricted to, the drafting of wills, administration of trusts and estates, beneficiary funds, tax and financial advice and the management of client funds. 

 FISA members collectively manage in excess of R280 billion. They draft several thousand wills each year and administer around 50 percent of deceased estates reported to the Master’s Office.

 FISA helps to smooth processes  for members and the public, particularly through its good working relationship with the Master’s Office and SARS.

[1] Act 45 of 1955

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