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South Africa: Tax to be introduced on lotto winnings

23 February 2011

SOUTH AFRICA -- (PRESS RELEASE) -- Those who rake in gambling winnings of over R25 000, including payouts from the National Lottery, will from next year have to pay a 15 percent withholding tax, the Minister of Finance Pravin Gordhan announced in his Budget Speech on Wednesday.

Presenting a budget which will see individuals receive moderate tax relief amounting to R8.1 billion, Gordhan said the withholding tax on gambling would come into effect from April 2012.

He said the tax on gambling is in line with practices in other countries such as the US, and added that he hoped it would discourage excessive gambling.

Turning to individual tax relief, Gordhan announced a rise in the threshold at which income tax becomes payable, from R57 000 to R59 750 for taxpayers below age 65, and R93 150 for those 65 and older.

Gordhan also proposed a third rebate of R2 000 per year, increasing the tax threshold for taxpayers aged 75 and older to R104 261.

Annual tax-free interest income for those below 65 years old would increase to R22 800, and to R33 000 for individuals 65 years and over.

Gordhan said the National Treasury is exploring the possibility of incentivised savings schemes for housing or for education as alternatives to this exemption.

The tax-free lump sum benefit upon retirement will increase from R300 000 to R315 000.

Tax-deductible contributions to medical schemes and those for qualifying out-of-pocket medical expenses will be converted into tax credits with effect from March 2012.

"A tax credit is more equitable since it provides for an equal benefit to all taxpayers regardless of their income," explained Gordhan.

The minister also proposed changes to the tax treatment and administration of contributions to retirement funds and added that the National Treasury would hold extensive consultation on the matter.

The proposals include treatment of employer contributions as a fringe benefit, limits on tax deductible contributions and alignment of the tax treatment of provident and pension funds.

From March 2012, an employer's contribution will be treated as a taxable fringe benefit, and employees will be allowed to deduct up to 22.5 percent of taxable income for contributions to approved retirement funds. A maximum of R200 000 a year will be deductible.

With a view to protecting workers' savings, it is proposed that the one-third lump-sum withdrawal limit applicable to pension and retirement annuity funds should also apply to provident funds.

Excise duties on alcoholic beverages will be increased by between 4.5 percent and 10.3 percent - an increase of 6.4 cents for a 340ml can of beer, 13.5c per bottle of wine, or R2.86 for a bottle of spirits.

Taxes on tobacco products will increase between 6 percent and 10.2 percent - 80c more for a packet of 20 cigarettes.

Gordhan said the ad valorem excise tax on new motor vehicles would remain unchanged below a purchase price of R900 000.

For vehicles above R900 000, the tax rate will increase to a maximum of 25 percent, from 20 percent at present.

Other indirect taxes which will increase are:

-The general fuel levy, which will increase by 10c a litre on both petrol and
diesel on April 6

-The Road Accident Fund levy will be increased by 8c, to 80c a litre

-Increases will take effect on October 1 in the air passenger departure tax on flights to international destinations

-The levy on electricity generated from non-renewable and nuclear energy sources will increase by 0.5c/kWh to 2.5c/kWh from April.

Gordhan added that the increase should not impact on electricity tariffs, as it has already been taken into account in the National Energy Regulator's approved tariff structure.

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