Budget 2016: How it affects you

The Budget delivered by Pravin Gordhan, the minister of finance (at time of this article), has been touted beforehand as the most important budget since 1994.
What the people expected from him and on his agenda:
  • He needed to restore confidence in South Africa
  • Avoid recession
  • Avoid ratings downgrade
Because of the big budget deficit the need existed for more income (tax) to the government. Company tax increase with the weak economy and VAT increase within an election year seamed highly unlikely. The expectation was that individual income tax on individuals would be raised to compensate for the budget shortfall.
Surprisingly that did not happen but the following were the positives and negatives for SA taxpayers:
The budget affected you negatively if you:
  • Are a sinner – taxes on cigarettes and alcoholic drinks
  • Use transport. 30c/l increase in tax on fuel from the 6th of April 2016
  • Buy tyres (even bicycles) – A new tyre levy, 2.30/ kg rubber
  • Have a sweet tooth. A new sugar tax coming 2017
  • Want to buy a house above R10 million in value. An extra 2% transfer duty levy
The biggest shock of the budget was the capital gains inclusion rate that has been changed drastically. The only relief a natural person has is that the yearly exclusion on capital gains went up from R30 000 to R40 000.
Was the budget all doom and gloom?  The following were positives from the budget:
  • The normal inflationary tax relief were given for lower income owners.
  • Deductions to any retirement fund were increased to 27.5%.   Capped at R350 000 per annum.
  • SARS gave an amnesty period for taxpayers to come forward with foreign assets.
  • No changes were made (yet) to estate duty, trusts or Vat
Overall, the tone of the budget is very welcome. The Minister is clearly determined, to avoid any further credit rating downgrades. Only time will tell if this will be enough to protect the currency and prevent further downgrades.
PJ Botha

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