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Monday, 13 June 2016 15:51

Tax Admin breaks down new income tax threshold effective July 1

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Legislation has now been amended to bring into law, the increase in the income tax threshold of $407,492 from $592,800 to $1,000,272, effective July 1, 2016.

This change will positively impact employed and self-employed individuals as well as pensioners.

The new July 1 threshold of $1,000,272 will result in an effective threshold of $796,536 for the year of assessment 2016 as follows:

Individuals who earned in excess of $592,800 but less than $796,536, from which income tax was deducted, may, before December 31, 2016, have the tax paid/deducted refunded by their employers. Persons earning $796,536 or less will pay no income tax.

Also to come into effect is an increase of 5% in the income tax rate on statutory income in excess of $6,000,000. Statutory income as defined in the Income Tax Act means (subject to section 6) “the aggregate amount of income of any person from all sources remaining after allowing, the appropriate deductions and exemptions under the Act”.

As a result, individuals whose income exceeds $6,000,000 will be required to pay tax at the rate 30% on their income in excess of $6,000,000. However income above the threshold of $796,536 and up to $6,000,000 will continue to be taxed at 25%.

The table below gives a breakdown of the new rate threshold and rate:

Effective April 1, 2017, there will be another increase in the threshold from $1,000,272 to $1,500,096. This adjustment will result in an additional increase of $499,824. The effective threshold for the year of assessment 2017 will therefore be $1,375,140. The full threshold of $1,500,096 will become effective on January 1, 2018. These changes were announced by the Minister of Finance & the Public Service on Thursday May 12, 2016, and form part of the Revenue Measures for the 2016/17 fiscal year.

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