Our new Finance Minister, Enoch Godongwana, presented his first budget which was positive overall despite our country’s many realities of slowing growth, rising inflation, increased debt, and rising unemployment.
The higher-than-expected estimated tax revenue collection has made it possible for him to provide us with tax relief in the coming tax year.
We gladly welcomed no increases to our fuel levy and road accident fund levy, as well as a review of all aspects of the fuel price.
Here follows a summary of the main points of the Speech:
Personal income tax
Adjustments to the personal income tax brackets and the primary, secondary and tertiary rebates of 4.5%.
This refers to the amount of income that you can earn before you need to pay tax. The thresholds have been increased by 4.5% and are as follows:
• If you are under age 65, your yearly tax threshold is R91,250 (previously R87,300)
• If you are between 65 and 75, the threshold is R141,250 (previously R135,150)
• If you are 75 or older, the threshold is R157,900 (previously R151,100)
This remains unchanged. If you are under age 65, the annual interest exemption is R23,800, and if you are 65 and older, the exemption is R34,500.
How will the tax threshold and interest exemption changes affect you?
If you are between the ages of 65 and 75, you can earn a yearly income of R141,250 plus R34,500 interest before you have to pay tax. If you are 75 or older, you can earn an annual income of R157,900 plus R34,500 interest before you have to pay tax.
Tax-free savings account contribution unchanged
The amount that you can contribute towards a tax-free savings account remains unchanged at R36,000 per year, capped at R500 000 in your lifetime.
Dividends Withholding Tax
Dividends Withholding Tax remains unchanged at 20%.
The tax treatment for contributions to all retirement funds remains unchanged, limited to 27.5% of the greater of the amount of remuneration for PAYE purposes or taxable income. The deduction is further limited to the lower of R350,000 or 27.5% of taxable income before the inclusion of a taxable capital gain. Any contributions exceeding the limitations are carried forward to the following year of assessment.
Pension and Retirement Annuity Funds, (and Provident Funds since 1 March 2021) require a compulsory annuity purchase upon retirement with two-thirds of such fund benefits. The threshold below which a full fund benefit is allowed to be withdrawn is R247,500.
Government has proposed a fundamental restructuring of the retirement system for individuals to allow for partial access to retirement funds. This would, however, be dependent on the approval by trustees of each retirement fund. Draft legislation on these amendments will be published for comment in the middle of the year.
Proposed amendments to Regulation 28 (Investment guidelines for Retirement funds) relating to greater investment in infrastructure are expected to be gazetted next month.
Foreign employment income
The exemption for foreign employment income of tax residents remains unchanged at R1,25 million.
Capital Gains Tax (CGT)
The capital gains exemption thresholds remain the same:
- The annual exclusion stays at R40,000
- The exclusion amount of death stays at R300,000
- The primary residence exclusion stays at R2 million
The effective rate of CGT ranges between 7.2% to 18% for individuals, 21.6% for companies (now taking the new Corporate Tax rate of 27% into account) and 36% for Trusts.
Adjustments to medical aid tax credits
Medical tax credits have been adjusted by 4.5% as follows:
- R347 per month for the main member and the first dependant on a medical scheme (previously R332 per month).
- R234 per month for each additional dependant (previously R224 per month)
Estate Duty tax remains unchanged. The estate duty abatement (exempt threshold) remains at R3,5 million per person, and the surviving spouse may benefit automatically from any unused deduction in the first dying spouse’s estate. In other words, the abatement remains a combined maximum of R7 million for the second dying spouse. You receive a deduction for bequests to public benefit organisations.
Estate Duty for dutiable estates up to R30 million remains at 20% and is 25% for dutiable estates over R30 million.
You do not pay Estate Duty on the value of your Retirement Funds, your Living Annuities, or on the value of the assets you leave to your surviving spouse.
Loans to Trusts
Existing and future loans to Trusts attract 5% interest per year. This is taxable in the lender’s hands. The 5% interest will be deemed a donation and will attract donations tax of 20% each year.
Donations Tax is levied at a flat rate of 20% on the cumulative value of property donated since 1 March 2018 not exceeding R30 million, and 25% for amounts exceeding R30 million. The first R100,000 of property donated in each year by a natural person is exempt from Donations Tax.
There are no changes to Transfer Duty. A property costing less than R1 million will attract no duty. A 3% rate applies between R1 million and R1,375 million; 6% between R1,375 million and R1,925 million; 8% between R1,925 million and R2,475 million; 11% between R2,475 million and R11 million; and 13% thereafter.
The offshore investment allowance remains at R10 million per adult person per calendar year. In addition, the R1 million single discretionary allowance remains.
Good old Sin Tax
Increases of between 4.5% and 6.5% will immediately apply to the cost of your favourite tipple and smoke.
A 340ml can of beer or cider will cost 11c more, a 750ml bottle of wine will be 17c more expensive and a bottle of sparkling wine will cost an additional 76c, with an additional R4.83 added to the cost of a bottle of spirits. A packet of cigarettes will cost an additional R1.03 and vapers beware, you may be in for a new tax on your vaping products from 1 January 2023.
If you consider sugar a sin… an increase in the Health Promotion Levy of 0.21 cents to 2.31 cents per gram of sugar is effective from 1 April 2022.
Value-added Tax (VAT)
This remains unchanged at 15% and is levied on the supply of goods and services by registered vendors.
Our new Finance Minister ended with the following sentiment:
“You won’t realise the distance you have walked until you look back and realise how far you have come. We have been on this journey for a long time, and we still have a long distance to walk before reaching our goal.”