All eyes were on Finance Minister, Enoch Godongwana, when he delivered his maiden budget speech to South Africans yesterday. Taxpayers breathed a sigh of relief when he announced that there would be no major tax hikes. This was welcome news for South Africans who are dealing with the effects of Covid-19, rising inflation, interest rate hikes and  significant fuel price increases. 'Now is not the time to increase taxes' - thank you Mr Minister, we couldn't agree with you more!

The minister announced that SARS had brought in R182 billion more in taxes than had been predicted last year in February. This was partly due to  better than expected personal income tax and VAT collections, but mainly due to mining companies that benefitted from a boom in commodity prices.  He went on to point out that 'the improved revenue performance is not a reflection of an improvement in the capacity of our economy'.  He also cautioned that South Africans should not count on the mining windfall for too much longer.

The extra revenue has been used to reduce government debt (first time since 2015), while at the same time increasing support for the poor and unemployed. It has also enabled him to give some much needed relief to consumers.

Let’s look at each type of tax in more detail.

Personal Tax Rates

The personal income-tax brackets will be increased by 4,5% which is  in line with the inflation rate predicted by Treasury for the 2022/2023 tax year. The tax brackets are often manipulated by Treasury to sneak in some ‘hidden’ taxes, so this is good news!

The tax-free threshold for taxpayers under 65 years has increased to R91 250 (previously R87 300).

Taxpayers over 65 and below 75 years of age will have their first R141 250 tax-free (previously R135 150) and those taxpayers over 75 years of age will have their first R157 900 tax-free (previously R151 100) of income. 

Please click on our updated take-home pay calculator  to see how these changes will impact your net salary.

Capital Gains Tax

There were no changes to CGT this year. Individuals still have to include 40% of the gain in their income while companies and trusts still have to include 80% of the gain into their income. The overall maximum effective tax rates for individuals remains unchanged from last year at 18% and for companies and trusts it also stays the same at 22.4% and 36% respectively. (The maximum effective tax rate for companies will decrease to 21.6%  when the 27% corporate tax rate kicks in).

Dividends

The Withholding Tax on Dividends remains the same at 20%.

Estate Tax and Donations Tax

Donations Tax remains unchanged – it is levied on amounts over R100 000 in total per year at 20% and at a rate of 25% on donation values exceeding R30m. Remember that donations between spouses are still tax free! 

The Estate Duty threshold also 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 interest exemption thresholds stay at R23 800 for those under 65 years of age and R34 500 for those over 65.

The annual contribution limit for tax-free savings accounts remains unchanged at R36 000 with the total contribution life time limit capped at R500 000.

Medical Tax Credit

You and your first dependent will be allowed a tax credit of R347 (previously R332) and thereafter R234 (previously R224) for all other dependents.

The medical tax credit is not always adjusted (it did not change from 2018 to 2019), so this inflationary increase comes as a pleasant surprise.

Lump sum payouts and the retirement deduction 

There are no changes to the lumpsum tax rates (see table below).

Similarly, the retirement laws, which allow for the deductibility of provident, pension and retirement annuity contributions remain the same. The regime allows for a capped 27.5% of the greater of remuneration (i.e., your gross salary and benefits) or taxable income (income after deductions) to the maximum of R350 000 per year.

Retirement fund lump sum withdrawal benefits 

Retirement fund lump sum benefits or severance benefits 

Small Business Tax

There’s some good news for small businesses which qualify as a SBC – they also benefit from an inflationary adjustment to their tax brackets to bring their tax in line with the tax threshold for individuals.

Turnover tax rates have remained unchanged.

1) Income Tax: Small Business Corporations 

2) Turnover Tax for Micro Businesses

Corporate Tax

Corporate tax is to remain unchanged at 28% this year for companies with years of assessment ending on any date between 1 April 2022 and 30 March 2023. However, as already announced last year, 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. 

Sin Taxes

The “sinners” amongst us are never spared. Excise duties on alcohol and tobacco will increase by between 4,5% and 6,5%.

Beer will set you back an extra 11c per can, wine an extra 17c per bottle, sparkling wine an extra 76c per bottle  and spirits, a whopping R4.83 per bottle. Smokers will have to cough up an extra R1.03 per packet and an extra R6.77 per 23 grams of rolled cigar!

New on the cards will be a tax on vaping products of least R2.90 per ml from 1 January 2023.

Fuel levy

For the first time since 1990, the general fuel levy and RAF levy will remain unchanged for the next tax year. This comes as welcome relief for motorists who have faced soaring fuel prices since December due to higher crude oil prices and the weaker rand.