1. Personal income tax 2. Higher Education 3. Sin tax 4. Tax-free savings accounts 5. Fuel levy 6. VAT

The 2019/2020 budget speech was presented to South Africa on Wednesday with the hope that it would bring positive change, rebuild confidence and address some of the key challenges that South African consumers and businesses face.

The budget speech highlights government’s spending, tax and borrowing plans for the year.

Ester Ochse, product specialist at FNB Wealth and Investment, says, “Pressure has undoubtedly been on the South African National Treasury to take active steps to address financial shortcomings and enable local and global growth within the local economy. While these initiatives are underway, consumers need to understand why and how the budget speech affects them, business growth and investments in South Africa.”

Ochse unpacks a few areas that can affect consumers:

Simply defined, income tax is a government tax imposed on business and individuals who generate an income. Income tax is levied on income such as salaries, investments and rental income, annuities, pension income, to mention a few. Taxpayers are liable to pay income tax if they earn more than R78,150 and if younger than

65 years. If over 65 years of age or older, the tax threshold (i.e. the amount above which income tax becomes payable) increases to R121,000. For taxpayers aged

75 years and older, this threshold is R135,300.

Taxes can sometimes cause significant pressure on taxpayers. “We encourage taxpayers to manage their existing budget and ensure that their debt to income ratio is minimised at all costs,” says Ochse.

President Ramaphosa alluded to improving the education system in the 2019 State of the Nation Address (Sona). Saving for your child’s education should be a priority on a regular basis. With the increasing cost of education, parents are encouraged to continue making provision monthly for their children's future.

A sin tax is a tax rate for tobacco and alcoholic products. Each year the sin tax tends to increase between 6% and 10%, which can cause a bit of a hole in your pocket. Tobacco and alcohol products can become costly. She adds, “We advise consumers to allocate these extra costs in their monthly budgets and reduce consumption; which would ease expenses and keep consumers healthy.”

Tax-free savings were created as a saving initiative for all South Africans. With a tax-free savings account there is no tax paid on savings or investments. The annual tax-free savings limit is R33,000 per year and a lifetime maximum of R500,000. A tax-free savings account is a long-term investment vehicle which can benefit you or your child from re-invested and compound interest over many years. The key is to invest in assets that earn real (after-inflation) annual returns.

The financial year ends on February 28, 2019. Ochse explains, “South Africans still have an opportunity to take advantage of tax free savings as the benefits will give a huge boost to your investment over time. The key to investing is to invest early, stay invested and in time you will reap the rewards, regardless of how much you invest per month.”

Fuel levy is tax on fuel. Last year the general fuel levy increased by 22 cents per litre and the road accident fund levy by 30 cents. “With the increase in fuel costs consumers should look at carpooling or even using public transport. This will help ease the burden on your finances,” says Ochse.

Last year and for only the second time since its introduction, Value Added Tax (VAT) was raised by one percentage point to 15% as part of the 2018 budget by finance minister Malusi Gigaba. VAT is an indirect tax on the consumption of goods and services in the economy. Certain businesses are required to register and to charge VAT on the taxable supplies of goods and services.

“The budget speech should be an indicator of how we should better manage our finances. It should not be ignored because many of the changes affect you and your lifestyle. By ensuring that you understand what the budget speech means, you will be able to plan appropriately in the future,” concludes Ochse.