“Now is not the time to increase taxes and put the economic recovery at risk. Accordingly, we have decided to keep money in the pockets of taxpayers,” said Finance Minister Enoch Godongwana in his National Budget address on 23 February 2022. He said this in the context of the continuing effects of the Covid-19 pandemic and the resulting financial strain that most South Africans are grappling with.
While that may sound like music to our ears, what is really in store for South Africans? How will this new budget “strike a critical balance between saving lives and livelihoods while supporting inclusive growth,” as Godongwana says it will?
Let’s look at the 2022 Budget Speech Highlights:
What has changed?
Personal Tax Rates
You’ll be happy to see that personal income tax brackets will only be increased according to the predicted inflation rate of 4.5%.
- If you’re a taxpayer under 65 years: your tax-free threshold’s increased to R91 250 from R87 300.
- If you’re a taxpayer between 65 and 75 years of age: your firstR141 250 is tax-free (previously R135 150)
- If you’re a taxpayer over 75: your tax-free threshold’s increased to R157 900 from R151 10).
Medical Tax Credit
Treasury announced a very slight change for medical tax credits. The main member and first dependent are allowed a tax credit of R347 (a R15 increase) and R234 (a R10 increase) for all other dependents.
Although small, this increase is very welcome and not expected as the medical tax credit is not continually revised.
Small Business Tax
If your small business qualifies as a Small Business Corporation, Treasury announced some good news. Your SMC will benefit from an inflationary adjustment to their tax brackets to bring their tax in line with the tax threshold for individuals.
Turnover tax rates, however, have remained unchanged.
Excise duties on alcohol and tobacco will increase by between 4,5% and 6,5%. If you want to know how that’s going to affect your shopping basket:
- beer an extra 11c per can
- wine an extra 17c per bottle
- sparkling wine an extra 76c per bottle
- spirits an extra R4.83 per bottle
- cigarettes an extra R1.03 per packet and
- rolled cigar an extra R6.77 per 23 grams
New on the cards will be a tax on vaping products of at least R2.90 per ml from 1 January 2023.
What hasn’t changed?
All motorists can breathe a sigh of relief. For the first time in over 30 years, the general fuel levy and Road Accident Fund levy will remain the same.
Capital Gains Tax
There were no changes to Capital Gains Tax this year.
Individuals: still must include 40% of the gain in their income, and the overall maximum effective tax rates for individuals remain unchanged from last year at 18%.
Companies and trusts: still must include 80% of the gain into their income, and the overall maximum effective tax rates for companies and trusts stay the same at 22.4% and 36%, respectively.
The Withholding Tax on Dividends remains unchanged at 20%.
Donation Tax remains the same: 20% is levied on amounts over R100 000 per year and 25% on donation values exceeding R30m.
The Estate Duty threshold stays the same: above R3.5m, and up to R30m, estates will be taxed at 20%, and then at a rate of 25% above R30m.
Interest and investment exemptions
The threshold for interest exemption remains at R23 800 for those under 65 years of age and R34 500 for those over 65.
There was also no change on the contribution limit for tax-free savings accounts, the annual limit is R36 000, and the total lifetime limit is still capped at R500 000.
Corporate Tax is to remain the same at 28% this year for companies with years of assessment ending between 1 April 2022 and 30 March 2023.
However, as announced in 2021, there will be a reduction in the corporate tax rate to 27% for companies with years of assessments ending any date after 31 March 2023.
There are no shifts to the lumpsum tax rates.
The retirement laws which allow for the deductibility of provident, pension, and retirement annuity contributions also remain the same. The regime provides a capped 27.5% of the greater remuneration or taxable income to the maximum of R350 000 per year.
Although these points discussed here are just a summary of the more significant budget speech highlights and proposals, they are not yet legislated and may be subject to further changes. If there are any areas you need to understand further or if you would like to find out how these new plans may affect your business, contact the professionals for help.
Consider the experts
Dirmeik Consulting has an extensive understanding of tax and VAT laws and can give the correct and up to date advice on all your tax matters. We make sure to keep up to date with any new rules or regulations made by SARS.
Dirmeik’s tax experts can advise on all South African tax matters and endeavor to create the best solution for you and your business. Get in touch with us on our website.