23 Mar Budget 2016: How Will It Affect You?
Treasury’s 2016 Budget, delivered by Finance Minister Pravin Gordhan in his National Budget Speech recently, came amidst low economic growth, a possible downgrade to junk status and the country in the throes of a crippling drought. There were a few predictable budget and tax announcements, as well as some surprising ones. The question on everyone’s lips – how will the new budget affect me?
The good news
Surprisingly, there were no personal income tax increases and low to middle income earners as well as those on a better wicket (a taxable income of R 1 million per annum) will have marginal relief on personal income tax. The VAT rate of 14% remained unchanged and medical aid scheme tax contribution credits were granted. (If you are curious about how much money you need to earn to be considered a middle-class South Africa, see here…)
How the budget will affect the wealthy
For those who own assets in or outside the country, Capital gains tax will increase from 13.7% to 16.4%. Those purchasing properties above R10 million will pay a 2% higher transfer duty rate of 13% after the 1st of March.
Government also announced a final exchange control and tax amnesty, aimed at residents with undisclosed offshore funds. The message was clear– declare funds and expect favourable terms. Funds brought back into the country will incur a 5% penalty and funds remaining out the country, a 10% penalty. This gives wealthy individuals time to set the record straight before the Automatic Exchange of Information (OECD) programme kicks in next year.
How the budget will affect most of us
Some of the most notable announcements in Treasury’s budget may ultimately affect the average citizen, and this has garnered mixed reactions. There’s a fuel levy increase of 30 cents per litre, and the introduction of a levy of R2.30 per kilogram tyre on the cards from 1st October. In addition, as part of Government’s long term initiative to reduce greenhouse gas emissions and address climate change, an increase in vehicle emissions tax was announced. Owners of passenger vehicles will face a R10 increase and will now pay R100 for every gram of carbon emissions/km and double cab owners R140 – up from R125.
Still using incandescent light bulbs instead of energy efficient bulbs? Brace yourself! You can now expect to now pay R6 tax per globe. Plastic bags will incur a levy of 8 cents – up from 6 cents. And, if you enjoy cigarettes or alcohol, you will most likely begrudge the higher taxation on beer, wine, spirits, alcoholic fruit beverages, ciders, and cigars.
Another newbie to the budget was a ‘sugar tax’ on sugar-sweetened beverages. Government hopes that this tax will help to curb South Africa’s worrying obesity and diabetes levels. Although no figures have been announced yet, this is expected to be implemented in April 2017.
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