The boom in the SA new vehicle market looks set to continue after Finance Minister Trevor Manuel announced individual and company tax relief amounting to R19,1 billion in his Budget speech on Wednesday, but new revisions to car allowance taxation are bound to be less popular.
The boom in the SA new vehicle market looks set to continue after Finance Minister Trevor Manuel announced individual and company tax relief amounting to R19,1 billion in his Budget speech on Wednesday, but new revisions to car allowance taxation are bound to be less popular.
With a tax revenue over-run of slightly more than R41 billion, Manuel told Parliament that personal tax relief would rise from R7,1 billion last year in 2004/05 to R13,5 billion next year.
The income threshold below which no tax is payable by individuals is raised to R40 000 for the tax year beginning next month, and for taxpayers over the age of 65 to R65 000 a year. Changes to the tax brackets result in significant relief for all taxpayers, with an estimated 49 per cent of the benefit going to those who earn less than R150 000 a year, and 24 per cent of relief going to the income bracket R150 000 to R250 000.
In response, Naamsa president and Toyota SA chief executive Dr Johan van Zyl said strong domestic economic fundamentals, a positive global environment and a cash-flushed fiscus “enabled the Minister to introduce significantly increased funding for a broad range of social priorities and infrastructural development while granting personal income tax relief and abolishing regional services council levies which would benefit the corporate sector.
“The proposals represented a confidence building budget which would support consumer expenditure, stimulate investment, economic growth and development and employment,” he added.
It was not all good news, though. From March 1, the deemed private usage applied in calculating tax on motor vehicle travel allowances will increase to 18 000 km per year, the monthly taxable benefit of a company car will increase to 2,5 per cent of its value and, in keeping with the changes, the proportion of a motor vehicle allowance subject to PAYE tax will be increased from 50 to 60 per cent.
Dr Van Zyl commented that taxpayers would feel the full effect of changes to car allowance taxation provisions (announced in last year’s budget) in the current year of assessment. The motor industry expected there would be changes in consumers’ vehicle purchasing decisions and demand patterns with the most pronounced impact likely in the premium/luxury vehicle segments.
“Naamsa intends to recommend that National Treasury commission an independent study to establish the overall impact of the changes on the automotive market and structure,” he said.
However, Dr van Zyl acknowledged that the individual income tax relief granted in this year’s budget would go some way to offsetting the higher fringe benefit tax burden on motor cars.
Furthermore, there will be no increase in the general fuel levy this year, but the coffers of the embattled Road Accident Fund will benefit by an additional 5 cents a litre from April 5 2006. That will bring the tax share of the pump price of fuel to between 28 and 29 per cent – down from about 36 per cent a year ago. Following a review of international practice, it was proposed that the fuel levy rebate to encourage the domestic biodiesel industry should be raised from 30 to 40 per cent.