Households and small businesses will have more money left in their wallets thanks to government’s decision to adjust the income tax brackets and thresholds in line with inflation this year.
By Francois Williams, senior journalist at African Farming and Landbouweekblad
Thanks to R21,3 billion more tax collected in the past financial year, the state no longer needs to increase taxes to raise an additional R20 billion, as it had threatened in last year’s budget.
Finally, after two years, there are inflationary adjustments to the personal income tax brackets, while medical tax credits and tax thresholds have also been adjusted for inflation, according to the latest budget.
This will enable households and businesses to retain more of their income, which should support the economic recovery.
Although President Cyril Ramaphosa recently declared the outbreak of foot-and-mouth disease (FMD) a national disaster in his State of the Nation Address, Finance Minister Enoch Godongwana made almost no reference to it in his budget speech on Wednesday, 25 February. He referred to FMD only once as a risk to the economy.
His only other reference to agriculture concerned investment in water infrastructure. He said the focus would be on refurbishing large-scale schemes and ageing infrastructure, as well as completing strategic projects that support agriculture, among other sectors.
He also made no mention of Ramaphosa’s announcement that 10 000 additional agricultural extension officers would be appointed.
Also read: FMD a national disaster, but vaccines must be centrally controlled – Ramaphosa
VAT Thresholds Adjusted
Especially good news for many farming enterprises is that the threshold for compulsory VAT registration has been increased from R1 million to R2,3 million. This threshold was last adjusted in 2009. The threshold for turnover tax has been adjusted by the same amount. These adjustments take effect from 1 April.
Other important adjustments, effective from 1 March, include the capital gains tax exclusion on the disposal of a small business asset, which has been increased from R10 million to R15 million. This was last adjusted in 2012. The exclusion amount on the disposal of a small business by a person older than 55 years has been increased from R1,8 million to R2,7 million.
The general annual capital gains tax exclusion has been increased from R40 000 to R50 000. The annual limit on tax-free savings accounts has been increased from R36 000 to R46 000, while the lifetime limit remains R500 000.
The amount that individuals may contribute annually to retirement annuities or pension funds and deduct from taxable income has been increased from R350 000 to R430 000, provided that it does not exceed 27,5% of their total taxable income for the year.
Medical scheme tax credits have been increased from R364 to R376 for the first two beneficiaries and from R246 to R254 for additional beneficiaries.
Also read: Expert advice | Dealing with debt and tax
Excise and Fuel Tax
As requested by stakeholders in the liquor industry, government has increased excise duties on alcoholic beverages in line with the expected inflation rate of 3,4%. Consultations with stakeholders on the review of excise duties on alcohol will continue this year, according to the National Treasury.
Excise duties on wine will increase from R5,95 per litre to R6,15 per litre, on fortified wine from R10,04 per litre to R10,38 per litre, and on sparkling wine from R19,03 per litre to R19,68 per litre.
The general fuel levy will increase at a rate below inflation. The levy on diesel will rise by 8c to R3,93 per litre, while the levy on petrol will increase by 9c to R4,10 per litre.
The Road Accident Fund levy, which remained unchanged at R2,18 per litre last year, will increase by 7c to R2,25 per litre.
The carbon fuel levy on diesel has been increased from 17c to 23c per litre. On petrol, the carbon fuel levy has been increased from 14c to 19c per litre.
This year’s budget marks a significant turning point for South Africa, and public finances have been placed on a sustainable footing through determined action, said Dr Duncan Pieterse, director-general of finance, in the foreword to the Budget Review.
The improved tax revenue stems mainly from higher commodity prices in the second half of last year, which boosted mining companies’ income in particular and consequently their tax payments.
The National Treasury identified savings of up to R12 billion in the first phase of its campaign for targeted and responsible expenditure reductions. Of this amount, about R4 billion in savings has already been incorporated into this year’s budget.
Also read: Valuable advice from an agricultural accountant
Economic Growth and Inflation
The National Treasury expects the economy to grow by 1,6% this year, following last year’s expected growth of 1,4%. Over the medium term, real GDP growth is projected to average 1,8% and could reach 2% by 2028.
Exports are expected to grow by 1,6% this year, by 2,4% in 2027 and by 2,9% in 2028. Demand from South Africa’s major trading partners is projected to increase from an estimated 3,1% last year to 3,3% this year.
Expectations of good rainfall as a result of the La Niña phenomenon could boost agricultural production this year.
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