The National Treasury has published the draft Taxation Laws Amendment Bill (TLAB) and draft Tax Administration Laws Amendment Bill (TALAB) for public comment.
The TLAB and TALAB include the legislative amendments for the more complex tax proposals that were announced in the 2018 Budget Review on 21 February 2018, Treasury said.
These bills, Treasury said, complement the draft Rates and Monetary Amounts and Amendment of Revenues Laws Bill (Rates Bill), which was published on Budget Day on 21 February 2018.
They therefore exclude the tax proposals covered in the draft Rates Bill, which covered the changes to:
- The value-added tax rate;
- The personal income tax brackets;
- The medical tax credits;
- The rate of estate duty and donations tax; and
- Excise duties.
When looking at the section focusing on Income Tax for individuals, the amendments include a number of policy changes and corrections of anomalies, said Brian Dennehy, head of tax at law firm Webber Wentzel.
Below Dennehy set out a sample of these corrections, and when they will be implemented.
Medical tax credits
An amendment to section 6A of the Income Tax Act has been proposed to ensure that taxpayers who proportionately share in medical aid costs of a single individual are not entitled to each claim the medical tax credit for such shared dependant.
This amendment will be effective from 1 March 2018, and apply in respect of years of assessment commencing on or after that date.
Transfers between retirement funds of the same employer
Amendments to the Seventh Schedule of the Income Tax Act, which ensure that transfers between or within retirement funds of the same employer do not create a taxable fringe benefit in the employee’s hands, have also been proposed.
These amendments will apply, with retrospective effect, to years of assessment commencing on or after 1 March 2017.
Harmonising the tax treatment of retirement funds
Amendments have been proposed to the definitions of pension preservation or provident preservation funds to ensure that, as with retirement annuity funds, an expatriate may upon emigration withdraw the full post-tax value thereof.
The Income Tax Act currently only allows for the transfer of funds from a pension or provident fund to a retirement annuity fund after reaching normal retirement age where a taxpayer has not yet retired.
Transfers under such circumstances are to be expanded to similarly allow for transfers to pension preservation or provident preservation funds. These amendments are proposed to apply to assessment commencing on or after 1 March 2019.
Extension of employment tax incentive (ETI) scheme
The ETI regime was originally introduced in January 2014, in order to promote employment of young workers.
After an initial three-year period, the ETI regime was extended for a further two years. This extended period lapses on 28 February 2019.
Consequently, a further extension of the ETI regime for five years is proposed, which means the ETI will lapse on 28 February 2024. The proposed amendments will be effective from the date of promulgation of the Draft 2018 TLAB.