On the 26th of February 2014, Finance Minister Pravin Gordhan delivered a conservative budget. Whilst giving what may be his last budget speech, he highlighted the need for increasing economic growth to attain the National Development Plan’s goal of between 5% and 6% economic growth.
How the 2014 Budget affects you?
There were a number of tax proposals in this year’s budget speech that included:
Income tax relief
The 2014 budget has provided a total of R9.3 billion in income tax relief to households. Around 40% of this relief would go to lower income earners (below R250 000 per annum).
It has become somewhat of a tradition for Pravin Gordhan to raise sin taxes each year and 2014 is no different. If you indulge in smoking or alcohol, brace yourself for more increases.
The price of a 340ml can of beer has gone up 9 cents.
Whiskey drinkers will pay R4.80 more per bottle.
A pack of twenty cigarettes has gone up 68 cents.
There is more pressure at the pumps. From April 2nd 2014, the fuel levy will increase by 20 cents a litre, of this 8 cents a litre will go towards the Road Accident Fund.
The tax tables that relate to lump-sum retirement payouts have been adjusted, benefiting lower income members who previously did not benefit from deductible contributions. The tax-free, lump-sum amount that is paid out of retirement funds will increase from R315 000 to R500 000.
Focus was placed on retirement planning and lowering the costs in the system. Around 6 million employed South Africans do not currently have access to employer-sponsored retirement plans, which is being given attention.
Small Business Development
Pravin Gordhan confirmed government’s commitment to assisting smaller businesses and helping black economic development. He mentioned that tougher measures were being considered to enforce the rule that small businesses must be paid within 30 days.
The budget has also allocated R6.5 billion over the next three years to support small and medium enterprises.
The tax burden on micro-enterprises would be lightened with the amendment of the turnover tax regime.
It was also under consideration that the graduated tax structure for small business would be replaced with a refundable tax compliance credit.
The budget included a tax proposal that provides clarity on the valuation of company cars for fringe-benefit tax purposes.
Overall, the 2014 budget speech contained no big surprises. If however you are unsure of how the new announcements affect you or your business, contact Brett from Dirmeik Consulting on 021 421 4444.