“Our bigger challenge… is that our pie is not growing fast enough and this limits our ability to generate sufficient revenues to distribute among our priority areas.” (Finance Minister Enoch Godongwana – Budget 2024)

Finance Minister Enoch Godongwana’s third Budget Speech in an election year contained few surprises, but also little in the form of good news, especially for South Africa’s personal income tax payers.

The Minister quoted dismal local average expected real GDP growth of 0.6% for 2023, which is projected to reach 1.6% between 2024 and 2026. This poor economic performance is ascribed to the persistent constraints in electricity supply and freight, rail and ports, as well as a high sovereign credit risk.

And the result? A sharp drop in tax revenue collection for 2023/24 which, at R1.73 trillion, is R56.1 billion lower than estimated!

To make up the shortfall, Budget 2024 contains tax measures that will raise an additional R15 billion in 2024/2025, mainly through income tax raised by not adjusting personal tax brackets, rebates and medical tax credits for inflation, as well as above-inflation increases in alcohol and tobacco excise duties.

Other main proposals included no increase to the general fuel levy for 2024/25, a global tax on multinational companies in South Africa with an annual revenue exceeding €750 million and the R150 billion withdrawal from SA’s Gold and Foreign Exchange Contingency Reserve Account.

These announcements are briefly detailed below, along with some of the other announcements that will impact individuals and businesses.

Budget proposals that will impact you

• Addressing the Budget shortfall, personal income tax brackets are not adjusted for inflation – so individuals who received a salary increase this year are likely to pay more tax as they could fall into a higher tax bracket.
• No inflation adjustments to the tax rebates.
• Medical tax credits per month are not increased by inflation.
• A one-year extension in the R350 Social Relief of Distress (SRD) grant and increases ranging from R20 to R100 per month in other social grants.
• Above-inflation increases in the excise duties on alcohol and increases of between 4.7 and 8.2% on tobacco products. This means that the duty on:
  • a 340ml can of beer increases by 14c,
  • a 750ml bottle of wine goes up by 28c,
  • a 750ml bottle of fortified wine goes up by 47c,
  • a 750ml bottle of spirits will increase by R5.53,
  • a 23g cigar goes up by R9.51,
  • a pack of 20 cigarettes, rises by 97c,
  • vaping products increase to R3.04 per millilitre.

• Two-pot retirement reform to be implemented on 1 September 2024, allowing individuals access to a portion of their retirement savings before their retirement date.

Budget proposals that will impact your business

• A global minimum corporate tax will be implemented from 1 January 2024, with multinational corporations with an annual revenue exceeding €750 million subject to an effective tax rate of at least 15%, regardless of where their profits are located. This will broaden the corporate tax base, enabling more tax revenue collection without increasing existing corporate taxes for local businesses. This new tax is expected to increase corporate tax collection by R8 billion in the 2026 tax year.
• An increase in the limit for renewable energy projects that can qualify for the carbon offsets regime, from 15 megawatts to 30 megawatts.
• An electrical and hydrogen-powered vehicle tax incentive introduced for manufacturers in 2026, enabling them to claim 150% of qualifying investment spending.
• An increase in the carbon tax from R159 to R190 per tonne of CO2 equivalent from 1 January 2024.

Budget proposals that will impact all

• The general fuel levy and the Road Accident Fund levy will not be increased this year, providing tax relief of R4 billion.
• However, the carbon fuel levy will increase to 11c per litre for petrol and 14c per litre for diesel effective from 3 April 2024.
• Plastic bag levy to increase to 32c per bag from 1 April 2024.
• The R150 billion withdrawal from SA’s Gold and Foreign Exchange Contingency Reserve Account to pay down government debt.

How best to manage your taxes going forward?

In addition to the announcements detailed above, other technical amendments proposed in the Budget 2024 may also require professional tax advice.

Furthermore, as tax collection remains government’s main source of income, you would be well-advised to rely on our expertise and advice as we determine the impact of the Budget 2024 announcements on your tax affairs.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© CA(SA)DotNews

“This is not an austerity budget. It is a budget that makes tough trade-offs in the interests of the country’s short and long term prosperity.” (Finance Minister Enoch Godongwana – Budget 2023)

Finance Minister Enoch Godongwana’s second Budget contained no major tax proposals, thanks to an improvement in revenue from higher collection in corporate and personal income taxes, and in customs duties.

Instead, the focus of Budget 2023 was firmly on the current energy crisis, which has resulted in a State of Disaster being declared. It announced that government will take over R254 billion of Eskom’s debt over the next two years, subject to stringent conditions.

Of the tax relief amounting to R13 billion to be provided to taxpayers in 2023/24 announced in the Budget, R9 billion is earmarked to encourage households and businesses to invest in renewable energy. More specifically, R4 billion in relief is provided for households that install solar panels and R5 billion to companies through the expansion of the existing renewable energy incentive.

These incentives are briefly detailed below, along with some of the other announcements that will impact individuals and businesses.

Budget announcements that will impact you personally

• A new tax incentive to install rooftop solar panels: For one year from 1 March 2023, individuals will be able to claim a rebate of 25% of the cost of installing rooftop solar panels, up to a maximum of R15,000, to reduce their tax liability in the 2023/24 tax year.
• The personal income tax brackets will be fully adjusted for inflation, increasing the tax-free threshold from R91,250 to R95,750.
• Medical tax credits per month will be increased by inflation to R364 for the first two members, and to R246 for additional members.
• The retirement tax tables for lump sums withdrawn before retirement and at retirement, will be adjusted upwards by 10%, increasing the tax-free amount at retirement to R550,000.
• Revised draft legislation on the ‘two-pot’ retirement system will be published, including the amount immediately available at implementation from 1 March 2024. Withdrawals from the accessible “savings pot” would be taxed as income in the year of withdrawal.
• Social grants will increase in line with CPI inflation. The R350 grant will continue until 31 March 2024.
• Increases in the excise duties on alcohol and tobacco of 4.9%, in line with expected inflation. This means that the duty on:

• a 340ml can of beer increases by 10c,
• a 750ml bottle of wine goes up by 18c,
• a 750ml bottle of spirits will increase by R3.90,
• a 23g cigar goes up by R5.47,
• a pack of 20 cigarettes, rises by 98c.

Budget announcements that will impact your business

• Expanding the existing section 12B tax allowance for renewable energy, businesses will now be allowed to reduce their taxable income by 125% of the cost of an investment in renewables for two years from 1 March 2023. There will be no thresholds on the size of the projects that qualify. According to National Treasury, where a renewable energy investment of R1 million is made by a business, that business will qualify for a deduction of R1,25 million, which could reduce the corporate income tax liability of a company by R337,500 in the first year of operation.
• The existing Bounce Back Loan Guarantee Scheme will be updated to become the Energy Bounce Back Scheme, to be launched in April 2023. Government will guarantee solar-related loans for small and medium enterprises on a 20% first-loss basis.
• The research and development tax incentive will be extended for 10 years and will be refined to make it simpler and more effective.
• The urban development zone tax incentive will also be extended, by two years.
• Manufacturers of foodstuffs will for two years (from 1 April 2023) also qualify for the refund on the Road Accident Fund levy for diesel used in the manufacturing process, such as for generators, to ease the impact of the electricity crisis on food prices.

Budget announcements that will impact all

• Providing tax relief of R4 billion, the general fuel levy and the Road Accident Fund levy will not be increased this year. However, the carbon fuel levy will increase by 1c to 10c/l for petrol and 11c/l for diesel from 5 April 2023.
• The health promotion (sugar) levy will remain unchanged for the following two fiscal years.
• The brackets of the transfer duty table will also be increased by 10%, allowing properties below R1.1 million to avoid any transfer duty payments.

How best to manage these changes and their impact?

In addition to the announcements detailed above, there were other technical amendments proposed in the Budget review that will require professional advice.

As tax collection remains government’s main source of income, you and your business would do well to rely on the expertise and advice of tax professionals as you determine the impact of the Budget 2023 announcements on your tax affairs.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© CA(SA)DotNews