On 22 February 2023, the South African Finance minister delivered his budget speech.
Duane Gilbert, Chief Investment Officer at RISE, a fund administration and investment management business fully owned by EasyEquities, shares some of his insights on the speech.
“This was quite a balanced budget. By that, it strikes a sensible balance between spending/tax relief and fiscal discipline. Despite the initiatives discussed, the government will still achieve a main budget primary surplus in 2022/23. The consolidated budget deficit will decline from 4.6 per cent of GDP in 2021/22 to 4.2 per cent in 2022/23.”
One of the main topics covered was surrounding tax. Here are some highlights we thought you’d like to know as a consumer and investor.
Income Tax
The income tax bracket remained unchanged. The maximum taxable income slightly changed to R1 817 00, and R237 100 now falls under the 18% tax bracket. Tax on local and international dividends remained unchanged at 20% (this may differ due to double tax treaties).
Personal Income
| Taxable income (R) | Rates of tax (R) |
| 1 – 237 100 | 18% of taxable income |
| 237 101 – 370 500 | 42 678 + 26% of taxable income above 237 100 |
| 370 501 – 512 800 | 77 362 + 31% of taxable income above 370 500 |
| 512 801 – 673 000 | 121 475 + 36% of taxable income above 512 800 |
| 673 001 – 857 900 | 179 147 + 39% of taxable income above 673 000 |
| 857 901 – 1 817 000 | 251 258 + 41% of taxable income above 857 900 |
| 1 817 001 and above | 644 489 + 45% of taxable income above 1 817 000 |
Companies
| Years of assessment ending on any date between or… | Rate of Tax |
|
between 1 April 2022 – 30 March 2023 |
28% |
| on or after 31 March 2023 | 27% |
Capital Gains Tax (CGT)
Capital gains tax remains unchanged, including primary residence CGT. Tax rate for CGT for individuals ranges between 7.2% and 18%. For companies it’s 21.6%, and 36% for Trusts.
Property
Properties that cost less than R1 100 000 attract no transfer duty. This is a 10% increase on the previous tax bracket. The revised is as follows:
| Value of the property (R) | Rate |
| 1 – 1 100 000 | 0% |
| 1 100 001 – 1 512 500 | 3% of the value above R1 100 000 |
| 1 512 501 – 2 117 500 | R12 375 + 6% of the value above R 1 512 500 |
| 2 117 501 – 2 722 500 | R48 675 + 8% of the value above R 2 117 500 |
| 2 722 501 – 12 100 000 | R97 075 +11% of the value above R2 722 500 |
| 12 100 001 and above | R1 128 600 + 13% of the value exceeding R12 100 000 |
Tax-free savings account (TFSA) and RA
Tax-free contributions remained unchanged at R36 000 per year and R500 000 in a lifetime. Lump sum withdrawal at retirement is adjusted by 10% to R550 000. If your RA is worth R247 500 or less, the entire amount can be withdrawn tax-free on retirement.
Retirement fund lump sum withdrawal benefits table (pension, pension preservation, provident, provident preservation or retirement annuity fund on withdrawal).
| Taxable income (R) | Rate of tax |
| 1 – 27 500 | 0% of taxable income |
| 27 501 – 726 000 | 18% of taxable income above 27 500 |
| 726 001 – 1 089 000 | 125 730 + 27% of taxable income above 726 000 |
| 1 089 001 and above | 223 740 + 36% of taxable income above 1 089 000 |
The two-pot retirement system is expected to be implemented from 1 March 2024.
Other Taxes
Tax rebates on PV solar panels
In the 2023 SONA, President Cyril Ramaphosa made mention that government will introduce an incentive for solar usage; the incentive is known as the Energy Bounce Back Scheme (to be launched in April 2023), which is as follows:“Unfortunately, for large-scale independent power producers, the budget was disappointing,” comments Duane. “Investors in these projects we were looking for more concrete support for Eskom’s Renewable Energy Independent Power Producer Program; a program where independent producers can supply renewable energy into the national grid. While the budget echoed the sentiment, no financial commitments were made. The R254bn allocation to Eskom is purely for debt relief, not for investment into new grid infrastructure and the likes. This incentive will be available for one year. Again, the rebate excludes the cost of batteries and inventors.”
When asked how he thinks Eskom plans to change the outlook, Duane commented:“ Surprisingly, it doesn’t. The transfer of R254bn is specifically to reduce Eskom debt. But remember, Eskom is a state-owned entity, and all of their debt is government guaranteed in any event. Hence, all we see is a debt transfer from Eskom’s balance sheet to our sovereign balance sheet.
“Now, the debt that Eskom accumulates (and the rate at which they accumulate it) is certainly a problem. This impacts Eskom’s ability to perform maintenance, their ability to invest in new infrastructure and their ability to keep electricity tariffs down. It also directly affects our sovereign credit ratings. Rating agencies don’t only focus on our government debt to GDP ratio, but also on government debt, including explicit and implicit guarantees, to GDP.”
The 2023 Budget will allocate additional funding totaling R227 billion during the medium term. You can watch the highlights of the budget speech on Business live here or below.
Source: RISE, 2023 Budget speech, SARS