On 22 February, the South African Minister of Finance, Pravin Gordhan, delivered his annual budget address in Parliament. While the budget, which sees government spending exceed R1 trillion for the first time ever, was welcomed by various financial analysts, what most South Africans are interested in is what financial implications the new national budget will have on them and their personal finances.
We break down the 5 major ways in which the budget will affect you:
Keep more of your earnings
The minister’s announcement of a personal income tax relief of R9.5 billion is great news for taxpayers, as this will mean you get to keep a greater portion of your earnings. This will however, benefit the lower income brackets more profoundly than the higher income brackets, as the percentage of money you save decreases as the amount of money you earn increases.
Save more now for later
Saving is not only great in securing your own future financial wellbeing, it is also beneficial to the country’s economy as a whole. Unfortunately, South Africans are not known for our fondness of saving, which is detrimental to long-term financial security. The Treasury intends to remedy this by introducing plans that will encourage individuals to save more, by reducing the amount of tax payable on savings. By allowing you to save up to R30 000 without paying tax on your returns, there has never been a better time to save up some of that excess cash.
In addition to the saving incentive, the new budget also allows for additional tax deductions from your salary, to go towards your pension, provident and retirement funds. This gives you the perfect opportunity to make provisions for when you are no longer able to work, without impinging too much on your current earnings.
Pay more for your sins and indulgences
Arguably one of the most eagerly anticipated parts of the budget speech is the announcement of sin taxes, as this is something that affects thousands of people on a daily basis. There were no surprises this year, with various increases applying to almost all of the sin taxes, with the prices of cigarettes and alcoholic beverages going up with between 5% and 20%.
In addition to these tax increases, owners of small aeroplanes, helicopters and yachts will now also have to pay an additional duty of between 7% and 10% for these luxury items.
Start something small
An encouraging and practical way in which the South African government is taking steps towards realising its ideals of job creation and development, is by introducing tax relief for small, medium and micro enterprises. Reducing the amount of tax payable by such SMMEs, as well as simplifying the tax process for them creates an ideal climate for entrepreneurship and start-up businesses to flourish.
Ride without the rage
Despite the introduction of a fuel levy of 20c per litre, most Gauteng road users breathed a sigh of relief when the minister announced a R5.8 billion subsidy to the Gauteng toll road system. This alleviates the financial load that would alternatively have fallen on the users of these roads. Then again it might be more beneficial to take public transport, which pays reduced toll rates or even taxis, as they are exempt from paying these toll fees.
Considering all the above-mentioned points, it is clear that the praise our Finance Minister has received for the new national budget is well deserved. With a little more money in our pockets and the drive to put the money to good (non)use, we can ensure that our personal finances will flourish for years to come.