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On the 22nd of February 2023, the Minister of Finance, Mr Enoch Godongwana presented his National Budget Speech. Let us take a closer look at some noticeable highlights and how it may impact you in the tax year ahead.
Addressing the Energy Crisis
The most pressing issue currently affecting every South African is the energy crisis, which is not only making it harder to go about doing daily tasks but is further increasing the costs of doing business in the country, leading to layoffs and increased prices of goods and services.
This, in turn, is causing the rand to weaken and investments to lose value as further pressure is put on the already high inflation rate. On Tuesday, it was announced that the country’s economy shrank by 1.3% during the last quarter of 2022, which was substantially more than expected.
The main contributing factor to this devastating statistic was the fact that during this period, there were only two days during which the country was not subject to loadshedding. According to estimates published by the Reserve Bank, the electricity crisis is costing the country as much as R899 million per day, and therefore our finance minister had no choice but to address this concerning matter during his speech.
He announced that the budget proposes a debt-relief arrangement worth R245 billion to aid Eskom’s deteriorating financial position, which will assist in providing the required funds for maintenance and future investments. He further announced that the budget made provision for tax reliefs worth R9 billion to encourage households and businesses to lessen their dependence on Eskom by investing in renewable energy.
Individual South Africans can now claim a tax rebate up to the value of 25% of the cost of new and unused solar PV panels installed at a private residence during the current tax year. This incentive can offset the personal tax liability of each individual taxpayer for the 2023/24 tax year up to a maximum of R15,000.
Although there were not any major tax proposals, it is worth taking note of some of the few adjustments that were announced, as they will to some extent, affect your personal finances. The income tax brackets as well as medical tax credits have been adjusted for inflation. The tax-free threshold for personal income tax has therefore increased from R91,250 to R95,750, and the medical tax credit has increased to R364 per month for the first two members and to R246 per month for additional members.
It was further announced that the retirement fund lump sum benefits as well as the retirement fund lump sum withdrawal benefits, had been adjusted upwards by 10%. This means that the tax-free amount that can be withdrawn at retirement, if no prior withdrawal was made, increased from R500,000 to R550,000. Godongwana also confirmed that new draft legislation is in the works to go ahead with the implementation of the new “two-pot” system from March 1, 2024.
Some relief for home buyers was also announced in the budget, as the brackets relating to transfer duty were also adjusted upwards by 10%. Home buyers of property below R1.1 million, previously R1 million, will therefore avoid having to pay transfer duties.
No changes were announced to the general fuel levy or the Road Accident Fund levy. However, it was announced that the diesel fuel levy refund will be extended to food manufacturers for a period of two years, from 1 April 2023 to 31 March 2025, in order to mitigate the impact of rising food and energy prices.
Although the main focus of the budget was on stabilising the electricity situation, it did recognise the need to encourage investments by cutting red tape and improving efficiency. Although no major tax proposals were made, the Minister acknowledged many South Africans’ tough financial situations and tried to aid where possible. The budget was clearly a balancing act, but many experts praised the minister, saying he did the best he could despite the country’s difficult circumstances.