How does the Budget speech affect you?
- Personal Income Tax: Above inflation adjustments to the personal income tax brackets and primary, secondary and tertiary rebates. The increase of 5% in the personal tax tables results in the tax-free threshold increasing from R 83,100 to R87,300 (for taxpayers below 65 years of age). This means all individual taxpayers will pay less in income tax this tax year than in the previous year. Proportionally, lower earners will get more relief. So, for example, someone with a taxable income of R100,000 a year, will pay R756 (or 25%) less in the next year. Those earning R750,000, will pay R4,500 (or around 2%) less than last year. This comes to R375 a month. Those with an income of R2 million, will pay R8,300 (or 1%) less. This comes to R690 a month.
- Medical Scheme Fees Tax Credits: The value of the medical tax credit is proposed to increase by inflation from R319 to R332 per month for the first two beneficiaries. The monthly credit for the remaining beneficiaries is proposed to go up from R215 per month to R224 per month.
- VAT Remains unchanged at 15%
- Fuel Levies: The general fuel levy and Road Accident Fund Levy will increase by 15c/litre and 11c/litre effective 7 April 2021. This is slightly higher than inflation.
- Sin Taxes or Excise Duties: There will be an increase in excise duties on alcohol and tobacco of 8%.
- Plastic Bags: A reduced levy of 12.5c/bag will apply to bio-based plastic bags (ordinary plastic bags will continue to be taxed at 25c/bag).
- UIF Contribution Ceiling: For the first time in four years, the UIF contribution ceiling will be adjusted. The contribution ceiling changes from R14,872 to R17,711.58 effective 1 March 2021.
Further important budget proposals to note:
Travel and work-from-home (WFH) benefits are under review. SARS has decided to review tax provisions for travel and working from home. “In light of the large scale migration to working at home over the past year, Treasury will review current travel and home office allowances to investigate their efficacy, equity in application, simplicity of use, certainty for taxpayers and compatibility with environmental objectives.
Here are the top points that are you need to be aware of, firstly from an Economic Outlook and Framework:
- South Africa has recorded the largest tax shortfall on record, collecting R213 billion less than was expected for 2020/21.
- Main budget revenue is projected to be R1,35 trillion or 25.3% as a share of Gross Domestic Product (“GDP”) in 2021/22. Budgeted expenditure, however, is expected to be R2 trillion for the same period.
- Real GDP is expected to grow at 3.3% in 2021 and 2.2%in 2022.
- Gross debt has increased from 65.6%to 80.3% of GDP for the year 2020/21.
- The proposed fiscal framework will stabilise debt at 88.9% of GDP in 2025/26.
- Over the medium term, debt-service costs are expected to average 20.9% of gross tax revenue. Put differently, 20 cents out of every Rand collected will go towards servicing interest.
- Funds in excess of R10 billion have been set aside for the purchase and delivery of COVID-19 vaccines. National Treasury sees a successful vaccine drive as key to the full reopening of the economy.]
The below table shows the personal income tax rates from 1 March 2021 to 28 February 2022 for individuals and trusts in South Africa:
So It is clear that there is a drive to improve the South African Revenue Services ability to collect tax revenues. With a tax policy framework that continues to increase in complexity, it’s important that taxpayers get the right advice so that unnecessary penalties and interest charges are avoided.
So get best of breed advice when it comes to doing your personal tax returns