Initial thoughts of the budget were that it was decent and well thought through.
It was met with mostly positive responses from analysts. There were also no significant tax increases.
Tax revenue surprised on the upside. There was a revenue overrun of more than R 90 billion. The biggest contributor to the overrun is the elevated commodity prices providing the mining companies with bigger profits and therefor bigger tax revenue. The full impact of loadshedding remains to be seen and can negatively impact future tax revenue collection.
Treasury also listened to the industry which resulted in the tax rebate on the instillation of solar panels for individuals and corporations.
It was also promising that there was not an increase in unnecessary expenses and public sector wages even with extra revenue that was received.
It seems that the biggest talking point in everyday life is about Eskom and the budget was no different.
Eskom received debt relief off R 254 billion. This relief is going to be staggered over 3 years. This is a total of 60% of the debt of Eskom.
Luckily this debt relief comes with conditions and Eskom have to be prudent about how it is managed going forward.
This debt relief will give space for new management to focus on power generation and reducing loadshedding.
The individual taxpayer will be impacted by the following:
- The normal inflation adjusted relief on tax payments. 4.9% increase in Annual Tax Rebates and Income tax brackets. If your taxable income is below R 95 750, you won’t have to pay any tax.
The medical aid contribution rebates also increased in line with inflation.
- No increase in the Road accident fund and fuel levies.
- Renewable Tax incentive: Install Rooftop solar panels. Entitled to tax rebate of 25% of the cost of the panels, up to maximum of R 15 000. Luckily, this is a rebate and not a deduction. You can get up to R 15 000 in your pocket.
- Rise in sin tax of 4.9% increase in line with expected inflation.
- There is an upward adjustment of 10% to tax brackets for Retirement fund lump sum benefit. The tax-free portion was R 500 000, is now R 550 000.
Unfortunately, there is no increase in tax free portion of Interest or Capital Gains tax.
Also, no increase in tax free savings contributions and retirement fund tax deductions.
All around we received a window of opportunity with extra tax revenue and hopefully the plans laid out by Treasury can be implemented to get our countries finances and debt back on track.
PJ Botha CFP ®, CA(SA)