On 16 February 2018, the Minister of Finance, Malusi Gigaba delivered the 2018 Budget Speech after much anticipation. But with so much being said in a short space of time, it’s easy to lose track of all the important announcements – and ultimately how they affect your pocket. So, to make it easier for you, we’ve summarised and simplified everything that you need to know right here in one place.
Want to know a bit more about these changes? Here’s a list of some other important things you need to know:
VAT increased from 14% to 15%
For the first time since 1993 VAT has increased from 14% to 15%. This means that government will be able to raise an additional R36 billion in 2018/19 alone – an amount that will cover about R23 billion of the current government debt. But, they’ve done their best to shield the poorest South African households, by keeping the current zero-rated VAT on basic items such as maize meal, brown bread and rice.
No inflation adjustment for the four wealthiest income tax brackets
Government will raise almost R7 billion through lower-than-inflation increases to personal income tax brackets and tax rebates. The top earners will bear the brunt of these increases – while the bottom three personal income tax brackets as well as the primary, secondary and tertiary rebates will be partially adjusted for inflation through a 3.1% increase, the top four brackets will remain unchanged.
No wealth tax, but…
While there has been much speculation about the introduction of a wealth tax – which would’ve meant that wealthy people could possibly be asked to make an annual payment tax on the sum of their assets – nothing with regards to this has been announced. Minister Gigaba did however increase the ad-valorem excise duty rate on luxury goods from 7% to 9%. Estate duty will also increase from 20% to 25% for estates of R30 million or more.
Higher fuel levies
The general fuel levy will increase by 22 cents per litre while the Road Accident Fund levy will rise by 30 cents per litre. This basically means that everyone – no matter which method of transport you use – will fork out more to get from point A to B.
Medical tax credit remains in place, but…
Medical tax credits have not been abolished, but will only increase from R303 to R310 per month for the first two beneficiaries (2.3%), and from R204 to R209 per month (2.5%) for the remaining beneficiaries.
“Over the next three years, below-inflation increases in medical tax credits will help government to fund the rollout of national health insurance,” the budget review stated.
Government also indicated that it was concerned that certain taxpayers might be “excessively benefiting from this rebate, specifically in instances where multiple taxpayers contribute toward the medical scheme or expenses of another person. Where taxpayers carry a share of the medical scheme, contribution or medical cost, it is proposed that the medical tax credit should also be apportioned between the various contributors”.
#FreeEducation is becoming a reality
Government seems to have a plan to start funding free education, because R57 billon has been allocated to free tertiary education over the next three years. This means that students from poor and working-class families will be prioritsed. “First-year students with a family income below R350 000 per annum at universities and TVET colleges in the 2018 academic year will be funded for the full cost of study. This will be rolled out in subsequent years until all years of study are covered.” Apart from this, returning NSFAS students at university will have their loans for 2018 onwards converted to bursaries.
State-owned companies will be turned around
It’s been the elephant in the room and government has announced that they will focus on reforming SOCs. This is because entities like Eskom and SAA have been a huge burden on government coffers amid allegations of mismanagement and corruption. “Some [SOCs] will require restructuring with equity investment. In the coming year, government may be required to provide financial support to several SOCs which could be done through a combination of disposing of non-core assets, strategic equity partners, or direct capital injections,” Gigaba said.
Apart from these announcements, government debt is projected to stabilize in 2022/23, with an anticipated growth of 1.5% in 2018, rising to 2.1% in 2020.
Disclaimer: The advice contained on this blog is for general purposes only and does not take into account individual circumstances, objectives or financial needs. Accordingly, readers are advised to seek appropriate advice from licensed professionals prior to making any investment, or taking up a financial product or service.