On 21 February 2024 Finance Minister Enoch Godongwana delivered his budget speech, summarised on a high level, as follows:
Social grants
| Increase in the old age, war veterans, disability, care dependency, child support, and foster care grants.
|
Financial Action Task Force | In 2023, the Financial Action Task Force grey listed South Africa. Progress is being made with remediating the deficiencies that have been identified by the FATF.
|
Two-pot system | The Minister noted the implementation of the two-pot system will take effect on 1 September 2024.
|
Unclaimed assets | The FSCA will issue a comprehensive response document to the discussion paper called ‘A Framework for Unclaimed Financial Assets in South Africa’ which was released in 2022.
|
Retirement funds | The retirement tax tables remain unchanged. The law allows certain tax‐free transfers of a non-voluntary nature for members over age 55 years, but excludes transfers from one retirement annuity fund to another. This was proposed to be amended to allow non-voluntary transfers of this nature.
|
Crypto assets | In 2024, there will be increased enforcement of unlicensed service providers of crypto assets. (In 2023, the FSCA declared crypto assets a financial product, requiring providers of financial services relating to crypto assets to be licensed by the FSCA).
|
Corporate Tax | There are currently no changes to corporate tax. Government has proposed a reform in corporate tax that will yield higher revenue in 2026/27. The draft bill is open for comment.
|
Individual tax | The marginal personal income tax rates have not increased. Changes have not been made to the tax brackets. The primary rebate has not increased and is still R17 235 per year. The secondary rebate which applies to individuals aged 65 to 74 has not increased and is still R9 444 per year. The third rebate which applies to individuals aged 75 and older has not increased and is still R3 145 per year.
|
Tax thresholds
| Thresholds for individuals who are not liable for personal income tax has not increased.
|
Interest exemption | Interest rate exemptions will remain the same.
|
Transfer duty | Transfer duty rates remain the same.
|
Capital gains tax | Taxation of capital gains remain the same.
|
Value Added Tax | The VAT rate of 15% remains the same.
|
Tax free savings account
| Tax free savings remains the same.
|
Medical tax credits
| Medical tax credit rates, estate duty and donations tax remain the same.
|
Sin tax | Increases in both the tobacco and alcohol levies. Fuel levies remain the same.
|
Carbon Tax
| Increase in carbon tax.
|
Electricity levies | Electricity levies remain the same.
|
Levies on Plastic
| Increase in levies on plastic.
|
Sugar taxes | Sugar taxes remain the same.
|
Estate duty and donations tax | Estate duty and donations taxes remain the same.
|
National Health Insurance
| There are a range of actions needed to improve public health care that are underway, but more development is needed before the NHI can be rolled out. |
Retirement reform, including the two-pot system
The Minister, in his speech, noted the developments in the implementation of the two-pot system. The Revenue Laws Amendment Bill, which introduces the two-pot system into the tax laws, was passed by the National Assembly on 20 February with an effective date of 1 September 2024. This Bill will now proceed to the National Council of Provinces for deliberation.
There are also changes to the Pension Funds Act making its way through the Parliamentary process. National Treasury aims to finalise the legislative process rapidly in the next few months to ensure that industry and regulators can prepare for implementation.
The Budget documents noted that an estimated R5 billion is likely to be raised in 2024/25 due to tax collected as fund members access once‐off withdrawals due to the two‐pot retirement reform. The seed capital transfer is a once‐off event, so this revenue will not flow into the following fiscal years.
Policy research and engagement continues on the outstanding auto‐enrolment, mandatory enrolment and consolidation retirement reforms.
Tax Harmonisation of Retirement Fund Contributions
As of 1 March 2016, all retirement funds (pension, provident and retirement annuity funds) are treated similarly for tax contribution purposes. The tax deduction formula of 27.5% per annum (with a cap of R350,000) of the greater of taxable income and remuneration applies to members of all retirement funds, including provident funds.
Annuitisation
Pension and Retirement Annuity (RA) Funds require a compulsory annuity purchase upon retirement with two-thirds of such Fund benefits value, while Provident Fund benefits value as of 1 March 2021 may be commuted in full, after which the annuitisation principle also applies to such subsequent contributions and growth thereon. The threshold below which a full fund benefit from a Pension, Provident or RA is allowed to be commuted is R247,500.
Unclaimed assets
At the end of 2022, the FSCA published a discussion paper, entitled ‘A Framework for Unclaimed Financial Assets in South Africa’, with recommendations to address high levels of unclaimed assets in the financial system.
The FSCA will release a comprehensive response to the submissions made on that paper in early 2024. This feedback will inform the development of a framework for the identification, monitoring, management and reporting of unclaimed assets, including tracing of beneficial owners.
Adjustments to Retirement tax tables
There are no adjustments to the retirement tax tables.
Retirement Fund Lump Sum Withdrawal Benefits
Taxable Income | Rates of Tax |
0 – 27,500 | 0% of taxable income |
27,501 – 726,000 | 18% of taxable income above 27,500 |
726,001 – 1,089,000 | 125,730 + 27% of taxable income above 726,000 |
1,089,001 and above | 223,740 + 36% of taxable income above 1,089,000 |
Retirement Fund Lump Sum Retirement Benefits or Severance Benefits
Taxable Income | Rates of Tax |
0 – 550,000 | 0% of taxable income |
550,001 – 770,000 | 18% of taxable income above 550,000 |
770,001 – 1,155,000 | 39,600 + 27% of taxable income above 770,000 |
1,155,001 and above | 143 550 + 36% of taxable income above 1,155,000 |
Transfers between retirement funds
In 2023, changes were made to legislation to allow for tax‐neutral transfers between retirement funds where members of pension or provident funds who have reached the normal retirement age but have not yet elected to retire, can transfer their retirement interest tax‐free if it is an involuntary transfer.
The law only allows certain tax‐free transfers of an involuntary nature and excludes transfers from one retirement annuity fund to another. It is proposed that the law be amended to allow involuntary transfers between retirement annuity funds. We will provide any further updates as they are released.