How does the 2022 National Budget Influence my Personal Finances?

As was expected, the Budget was not filled with any major shocks, with the only surprise being that tax revenue exceeded expectations and no increase in petrol levy.

The extra revenue took off the pressure of possible further tax rate hikes, but the cost of government especially the social grants and public sector wage bill stays an issue.

For tax payers this budget is in sharp contrast with previous budgets, where we got used to more taxes on the consumer. First it was the top marginal tax rate for individuals going up from 41% to 45% and then the increase in VAT rate from 14% to 15%.

In this budget the most important changes to note was:

  • There will be no increase in the fuel levy or the Road Accident Fund levy. But even without these increases, with Brent oil over US$100 petrol, we will be paying a lot more for petrol in the near future.
  • The corporate income tax rate will be reduced to 27% this year (from 28%) for companies with tax years ending on or after 31 March 2023. This brings our tax rate closer to the rest of the world’s lower tax rates.
  • Personal income tax brackets and rebates will be adjusted in line with the expected inflation rate of 4.5%. The maximum marginal tax rate remains at 45%.
  • Medical tax credits: the inflation adjustment to medical tax credits increases credits from R332 to R347 per month for the first two members and from R224 to R234 for additional members.
  • Sin taxes. Tobacco and alcohol excise duties will increase by between 4.5% and 6.5%.
  • There was however changes made to Pension funds with more offshore exposure allowed in Regulation 28. Esmarie will give us more detail on this subject, HERE.

But it is also important to note what was left out in the budget speech:

  • No change to tax-free limits
  • No change to reg28 retirement contributions
  • No change to the interest exemption.
  • No change to capital Gains exemption.

The interest and capital gains exemption hasn’t changed since tax-free was introduced in 2015 and I suspect it won’t ever change as the government likely thinks that tax-free accounts solve the problem.

In closing:
This Budget did not gave the tax payer a lot of any real financial planning opportunities but it also did not increase the current high burden on the tax payers.

If we compare this budget to previous years, we can give a sigh of relief.

PJ Botha CA(SA), CFP ®

Photo from National Treasury.

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