While there are signs of economic recovery in several other parts of the world, local growth remains low and below what is needed, considering unemployment and other imbalances in South Africa.
Minister Gordhan said that the revised estimate for tax revenue for 2012-13 is R810.2bn, R16.3bn lower than the estimate at the time of the 2012/13 Budget delivered a year ago. This demonstrates that he and the National Treasury had little room to move, especially with regards to tax cuts for individuals, who will nevertheless receive R7bn in "fiscal drag" adjustments, mainly benefiting low to middle income earners.
There have been some minor adjustments to tax brackets, rebates and interest exemptions.
While there is definite intent to make the retirement savings environment simpler and more equitable, it appears that further consultation is still being undertaken and that the new structure - enabling individuals to invest 27.5% of net income (employer and employer contributions) up to R350,000 a year into retirement savings - is still being ironed out and will not be introduced before 2015.
More clarity has been given on non-retirement preferred savings and investment accounts which will be launched in April 2015 with caps of R30,000 a year or R500,000 for a lifetime (adjusted annually for inflation), but this is aimed at the broad market and is not of particular interest to the high net worth individual market.
What is of particular interest to Nedbank Private Wealth clients is what appears to be a fresh attack on trusts. Page 54 of the Budget Review document carries half a page entitled "Reforming the Taxation of Trusts."
The document states: "To curtail tax avoidance associated with trusts, government is proposing several legislative measures during 2013/14. Certain aspects of local and offshore trusts have long been a problem for global tax enforcement due to their flexibility and flow-through nature. Also of concern is the use of trusts to avoid estate duty, which will be reviewed."
A caveat was added in the Budget Review document that proposals would not apply to trusts established to attend to the legitimate needs of minor children and people with disabilities.
As far as we at Nedbank Private Wealth are concerned, there has never been any evidence of avoidance measures or practices brought to our attention through the use of trusts to avoid income tax.
The reference to estate duty is somewhat curious. In the 2011/12 Budget, it was actually stated that estates brought in very little revenue for the government and were difficult and cumbersome to monitor and administer from a taxation point of view.
The way we at Nedbank Private Wealth see it, most trusts are accumulators of wealth that persists and is passed on from one generation to another, therefore creating and protecting savings. We believe that properly used and constituted trusts should be seen and treated as positive contributors in the light of the government's intention to grow the savings profile and culture of South Africans.
Comments provided by Niel Raubenheimer, a fiduciary specialist at Nedbank Private Wealth.
