February 2009 Archives

Personal finance may appear simply to be about numbers, where you have to spend less than you earn, where you have to save a bit for a rainy day, and where you have to use your credit card sparingly; but I am convinced that personal finance is often more about psychology than it is about mathematics.

Everyone knows that you have to spend less than you earn but, as someone once suggested, it’s very much like one’s physical health, where we all know what we are supposed to do, we just have great difficulty doing it. In fact, running your finances compares well with losing weight. In theory, it is easy, but in practice it can be extraordinarily difficult. For weight loss, all you have to do is eat a balanced diet and exercise, and to be healthy financially you just have to spend less than you earn.

Relief for Individuals

Personal Income Tax
Budget 2009 provides significant tax relief to individuals amounting to R13 billion countering the effects of inflation (bracket creep) as well as providing real relief.
This means that individuals younger than 65 years of age earning a total amount of–
• R60 000 will pay an amount equal to an average rate of 1.7% of the earnings and save R1 476;
• R200 000 will pay an amount equal to an average rate of 15.5% of the earnings and save R2 426;
• R750 000 will pay an amount equal to an average rate of 31% of the earnings and save R5 526.

The tax threshold for individuals younger than 65 will be R54 200 and for individuals 65 or older R84 200.

Increased exemption for interest and dividend income
The annual exemption on interest earned for individuals younger than 65 years is raised from R19 000 to R21 000. The exemption for individuals older than 65 years increases from R27 500 to R30 000. The threshold for the tax free portion of interest and dividends from foreign investment increases from R3 200 to R3 500.

Capital Gains Tax
Annual exclusion threshold for capital gains or losses increases from R16 000 to R17 500.

Medical Expenses
From 1 March 2009 the tax exempt or deductible portion of monthly contributions to medical schemes is increased from R570 to R625 for each of the first two beneficiaries and from R345 to R380 for each additional beneficiary.

Criminals and possibly syndicates are taking advantage of the close of the tax season, and the South African Revenue Service (SARS) has warned taxpayers to be on the look out.