GOVERNMENT has reviewed the tax-free bonus threshold from $ 1 000 to $ 5 000 with effect from this month with civil servants also expected to get their full annual bonuses pegged on gross income.
Presenting the 2020 National Budget Statement, whose theme is, “Gearing for Higher Productivity, Growth and Job Creation,” in Parliament yesterday, the Minister of Finance and Economic Development, Professor Mthuli Ncube, said that the prevailing inflationary environment had eroded incomes for most workers.
“Government is committed to ensuring a decent standard of living for public servants, and will take inflationary developments (COLA) into account in the ongoing wage negotiations. Meanwhile, Treasury has made arrangements to pay all civil servants their bonuses in November 2019. I further, propose to review the tax-free bonus from $ 1 000 to $ 5 000 with effect from 1 November 2019 in line with bonus payments for civil servants,” he said.
Prof Ncube also announced an upward adjustment in the tax threshold for low income earners from $700 to $2 000 in order to improve disposable incomes.
“Wages and salaries have since been reviewed in line with economic developments resulting in bracket creep. I, therefore, propose to review the tax-free threshold from $ 700 to $ 2 000 per month,” he said.
The current tax-free threshold was last reviewed in August during the $10,85 billion Supplementary Budget and 2019 Mid-Term National Budget Review Statement.
The latest review is the third upward review of the tax-free threshold this year, after it was earlier adjusted from US$300 to US$350 (prior to the removal of the 1:1 exchange rate between the RTGS dollar and the United States dollar).
In order to safeguard the value of retrenchment packages, Prof Ncube reviewed the non-taxable portion of the retrenchment package from $10 000 to $50 000 or one-third of the package to a maximum of $80 000.
“Most retrenchees are unable to secure employment, hence engage in self-help projects to support their livelihoods using retrenchment packages as seed capital. Some of these self-help projects have transformed from micro to small and medium enterprises, hence have become the mainstay of the economy,” he said.
“In order to safeguard the value of retrenchment packages, I propose to review the non-taxable portion of the retrenchment package from $10 000 to $50 000 or one-third of the package, maximum of $80 000, with effect from 1 January 2020.”
As a way of cushioning low-income earners and high-volume businesses, Prof Ncube proposed to review the tax-tree threshold on electronic transactions from the current $20 to $100 and the maximum tax payable per transaction by corporates from the current $15 000 to $25 000 on transactions with values exceeding $1 250 000 and this becomes effective on 1 January next year. “I propose to review the tax-free threshold from the current $20 to $100 and the maximum tax payable per transaction by corporates from the current $15 000 to $25 000 for transactions with values exceeding $1 250 000,” he said.