Relief as tax rates go down, not up
Unexpected R14bn relief for SA’s taxpayers
Finance minister Tito Mboweni surprised everyone when he announced in his 2020 Budget Speech that he was giving some R2bn back to individual taxpayers and that VAT would stay at 15%.
Transport costs, however, go up by 25c a litre; 16c for the general levy and 9c for the Road Accident Fund.
Smokers and drinkers will have to bear more budgetary pain with the price of beer, wine, spirits, cigarettes, cigars and tobacco all going up.
The medium-term budget proposals had penciled in a R10bn increase in taxes.
If Mboweni had left the tax brackets as they were, salary increases would have delivered R12bn more in taxes. But Mboweni and his team realise that South Africans can’t take any more strain on their budgets and that raising taxes in such difficult times would be “foolhardy”.
Instead, Mboweni adjusted the brackets by more than inflation “to boost the economy”.
The result is a saving for taxpayers of some R12bn in increases the government would have received without tinkering with tax brackets and R2bn of real relief – in total R14bn of tax savings.
The tax revenue from tax proposals remains constant with that of last year as another R2bn will be raised from indirect taxes such as the carbon tax and a plastic bag levy.
Increases in the brackets and the income thresholds below which you do not pay tax have been increased by 5.2% – more than the current inflation rate of 4.5%.
In rands, it does not amount to much, but taxpayers around the country will heave a big sigh of relief – rather a small saving than having to find more room to cut more expenses.
Mboweni is cutting government’s expenses and particularly government employees’ expenses, which he says are necessary to get the government’s house in order.
This means you can now earn R83,100 a year (up from R79,000) without paying any tax if you are under the age of 65 and R128,650 (up from R122,300) if you are over 65.
If you are over the age of 75, you can earn up to R143,850 (up from R136,750) before you will pay any tax.
In rands, the tax you pay over the year if you earn up to R150,000 a year (about R12,500 without a bonus) will come down by R738 (or R61.50 a month) if you are under the age of 65.
If you earn R250,000 to R300,000 a year (about R20,800 to R25,000 a month with no bonus), your tax will come down by R1,542 for the year (R128.50 a month).
For higher earners – more than R750,000 a year (about R62,500 a month), your tax will reduce by just over R5,000 for the year or about R417 a month.
Savings are higher for those aged 65 – around R95 a month for those earning R150,000 a year and around R106 a month for those over 75.