Individuals will receive tax relief of R13.5-billion in the 2009 Taxation Law Amendment Bills, Finance Minister Pravin Gordhan said on Tuesday.

"For individuals, the most important amendment was the adjustment to the personal income tax thresholds, which resulted in tax relief for individuals estimated at R13.5-billion," Gordhan said in the National Assembly.

Gordhan said a significant simplification of the tax treatment of lump sum payments from retirement savings and pre-retirement lump sum withdrawals would be implemented from this year.

For pre-retirement lump sum withdrawals from retirement savings the first R22 500 will be tax free.

In the case of a lump sum upon retirement, the first R300 000 is tax free.

Gordhan said that given concerns about the plight of workers losing jobs in the economic crisis, the draft bills propose that withdrawal from retirement funds on retrenchment will qualify for the R300 000 exemption.

"This concession will allow taxpayers significant relief in instances where circumstances beyond their control force them to make use of their retirement savings due to involuntary unemployment."

He said to improve the equity of the income tax system and broaden the tax base, treatment of travel allowances will be reformed.

This meant that the 'deemed kilometre method' for deducting travel expenses would be repealed with effect from 1 March.

"This amendment will eliminate an unintended subsidy for commuting by car," he said.

This announcement that a withdrawal from retirement funds on retrenchment will qualify for the R300 000 exemption is great news, but clearly a double edged sword. Most people who fail in their quest to retire comfortably do so exactly because they took an early withdrawal. One needs to eat, but just remember your retirement savings will most likely never recover from doing so. — Kabous le Roux (Personal Finance and Property Editor)

Sapa

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