|The Minister of Finance's Budget Speech 2006 is positive in many respects and from a property industry perspective, the reduction of the threshold on transfer duty - whereby now no duty will be paid on homes costing less than R500 000 with five percent to be paid on homes priced from R500 000 to R1 million, and eight percent thereafter, is most welcome news.|
This is of benefit to first time home buyers and particularly those with lower incomes, and will help make owning a home more affordable and achievable.
A further positive is the decrease in stamp duties on leases, with the threshold raised from R200 to R500 per agreement, and the zero rating of property rates for VAT, while additional good news for the housing market is the increase in primary residence exclusion for capital gains tax purposes from R1 million to R1,5 million.
Also particularly welcome is the reduction of duty on companies and trusts to eight percent from 10 percent. However, since the estimated total cost is R4,5 billion (some 10 percent of the revenue overrun) the concessions could perhaps have been greater.
There is still room for consideration of income tax relief on mortgage interest for lower income earners, in spite of the general income tax concessions in the Budget for those earning less than R150 000 a year and those earning between R150 000 and R250 000 a year. Significantly the marginal rate of tax remains 40 percent but the threshold moves up from R300 000 to R400 000.
It is disappointing that corporate taxes were not addressed, as these would have encouraged foreign fixed investments. Tax breaks for small businesses - particularly the tax amnesty, which hopefully should net in new sources of revenue - are good news in order to encourage entrepreneurship and help boost employment.
Interestingly, while the Minister recorded pride in the fact that 3,7 million individual tax returns were received in 2005, this is in fact less than 10 percent of the country's population - a very narrow tax base.
The 2010 World Cup spending of R5 billion (R3 billion over the next three years) will boost jobs - and also facilitate much-needed infrastructure. It was encouraging to hear of increased expenditure on housing and community development, and also skills training. However, while the individual offshore allowance increase from R750 000 to R2 million is a step in the right direction, it was disappointing that the Budget did not go further. We still have the controls - which tend to discourage foreign investors.
Again while it is positive to note the halving of tax on retirement funds from 18 percent to nine percent - a tax which was supposed to be temporary when it was introduced - this could have been scrapped altogether, and would only have cost another R2.4 billion, yet would surely have created significant encouragement to foster a culture of saving in South Africa.