South Africa | Draft rates bill amendments to employment benefits and retirement contribution tax deduction limits

South Africa | Draft rates bill amendments to employment benefits and retirement contribution tax deduction limits

South Africa’s Draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill, published following the 2026 Budget Speech, introduces proposed amendments to exemptions and retirement fund deduction limits, effective 1 March 2026.

Important notes
  1. The Income Tax Act, specifically section 5(2), section 6(6) and section 6A(5), allows the Minister of Finance to announce changes to normal tax rates, tax rebates and medical scheme fees tax credits during the Budget Speech, with effect from the announced date, provided the legislation is enacted within 12 months.
  2. Sections 1, 10, 11F, and the Seventh Schedule do not contain an equivalent Budget announcement mechanism permitting implementation from a budget announcement only.
  3. Amendments to those provisions therefore follow the default constitutional process applicable to Money Bills and only become law once passed by Parliament, assented to by the President and brought into operation.
  4. PAGSA, the Payroll Authors Group of South Africa, has received formal confirmation from SARS that the above proposed amendments may be implemented in payroll systems from 1 March 2026, notwithstanding that the legislation has not yet been formally promulgated.
  5. Implementation from 1 March 2026 aligns payroll treatment with SARS’ confirmed administrative position pending formal enactment.
What is changing
Bursaries and scholarships exemption, section 10(1)(q) and section 10(1)(qA)
  1. Remuneration proxy threshold increases from R600 000 to R900 000.
  2. Where the relative does not have a disability:
    1.  NQF Level 1–4, Grade R–12 exemption increases from R20 000 to R30 000.
    2.  NQF Level 5–10 exemption increases from R60 000 to R90 000.
  3. Where the family member has a disability:
    1.  NQF Level 1–4, Grade R–12 exemption increases from R30 000 to R45 000.
    2.  NQF Level 5–10 exemption increases from R90 000 to R130 000.
Exemptions, section 1(1), section 10(1)(gB)(iii) and paragraphs 5(2(b), 6(4)(d) and 10(2)(e) of the Seventh Schedule to the Income Tax Act
  1. Occupational death lump sum exemption increases from R300 000 to R800 000.
  2. Awards for bravery and qualifying long service exemption increases from R5 000 to R16 000.
Retirement fund tax deduction limit, section 11F
  1. Annual deduction limit increases from the lesser of R350 000 or 27.5% of remuneration to the lesser of R430 000 or 27.5% of remuneration.
  2. The 27.5% of remuneration cap remains unchanged.
Fringe benefit exemption on acquisition of residential immovable property
No fringe benefit value arises where:
  1. The employee’s remuneration proxy does not exceed R360 000, increased from R250 000.
  2. The property’s market value does not exceed R650 000, increased from R450 000.
  3. The exemption applies only where both thresholds are met.