The ‘No Fireworks’ Budget Speech Of 2022
Finance Minister Enoch Godongwana’s maiden Budget Speech of 2022 was themed “keeping money in the pockets of South Africans”. In essence, the budget speech boils down to making good use of small gains.
Treasury has done what it can to create an environment conducive to returning business confidence and investment, and the Cabinet is hoping that this more austere tack will lay a foundation for expansion and service reinvestment going forward. However, difficult trade-offs were required such as choosing to further reduce spending on health and education in favour of tax relief and encouraging investment.
Key Tax Related Matters
The minister of finance has delivered his budget speech on 23 February 2022, the following are a short summary of the key tax-related matters.
Individual and Trust taxes: New tables adjusted for inflation
INDIVIDUALS AND SPECIAL TRUSTS
Tax rates (year of assessment ending 28 February 2023)
|Taxable Income (R)||Rate of Tax (R)|
|1 – 226 000||18% of taxable income|
|226 001 – 353 100||40 680 + 26% of taxable income above 226 000|
|353 101 – 488 700||73 726 + 31% of taxable income above 353 100|
|488 701 – 641 400||115 762 + 36% of taxable income above 488 700|
|641 401 – 817 600||170 734+ 39% of taxable income above 641 400|
|817 601 – 1 731 600||239 452 + 41% of taxable income above 817 600|
|1 731 601 and above||614 192 + 45% of taxable income above 1 731 600|
Tax rebates and thresholds 2022/2023
|Age||Rebates (R)||Thresholds (R)|
|Primary (below 65)||16 425||91 250|
|Secondary (65 and older)||9 000||141 250|
|Tertiary (75 and older)||2 997||157 900|
Other trust – tax rate remains at 45%
- Exemption for interest & dividend income remained unchanged.
- Medical tax credit:
- First two beneficiaries: increased from R 319 to R 347
- Each additional beneficiary: increased from R 224 to R 234
- Contribution to tax-free savings account remains at R36,000pm
Disclosure of wealth
Provisional taxpayers with business interests are required to declare their assets (based on their cost) and liabilities in their tax returns each year. To assist with the detection of non‐compliance or fraud through the existence of unexplained wealth, it is proposed that all provisional taxpayers with assets above R50 million be required to declare specified assets and liabilities at market values in their 2023 tax returns. The additional information will also help in determining the levels and structure of wealth holdings.
- Reduced tax rate to 27% for years ending on or after 31 March 2023
- Limiting the use of assessed losses to reduce taxable income
- For years of assessment ending on or after 31 March 2023 companies will only be able to claim assessed losses against 80% of taxable income.
Employment tax incentive
Youth unemployment remains high at 56.2 per cent for 20‐to 29-years-olds in the third quarter of 2021. To encourage businesses to employ young people, government proposes an increase of 50 per cent in the value of the employment tax incentive, effective from 1 March 2022.
The incentive will increase from a maximum of R1 000 to a maximum of R1500 per month in the first 12 months and from R500 to a maximum of R750 in the second 12 months of eligibility. Improved targeting of the incentive will be considered to support jobs for long‐term unemployed work seekers, alongside an expansion of the eligibility criteria for qualifying employees to improve the incentive for small businesses.
Other Tax incentives
Research and development tax incentive to be extended to 31 December 2023, while the following incentives in the Income Tax Act (1962) will not be renewed when they reach their sunset date.
- Section 12DA (rolling stock) on 28 February 2022
- Section 12F (airport and port assets) on 28 February 2022
- Section 12O (films), which lapsed on 31 December 2021
- Section 13sept (sale of low‐cost residential units through an interest-free loan) on 28 February 2022.
All in all, this budget aims to address some of the challenges ahead, wanting to attain a critical balance between lives and livelihoods, while still enabling growth and investment. Striving to maintain growth and fiscal sustainability through narrowing the budget deficit, stabilizing debt and providing tax relief. All of which ties in with the budget theme of “keeping money in the pockets of South Africans’ and the government’s aims to be both investor- and consumer-friendly.
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