How you’re benefiting from the unexpected R14bn tax relief
Finance minister Tito Mboweni says it will be foolhardy to introduce tax hikes in this difficult time
Finance minister Tito Mboweni surprised everyone when he announced in his 2020 Budget Review that he was giving about R2bn back to individual taxpayers and that VAT would stay at 15% as “in this difficult time it would be foolhardy to introduce a hike”.
The medium-term budget proposals had penciled in a R10bn increase in taxes. If Mboweni had left the tax brackets as they were, salary increases would have just delivered R12bn more in taxes for him. But Mboweni and his team realise we can’t take any more strain on our budgets and that raising taxes in such difficult times would be “foolhardy”, so instead he has adjusted the brackets by more than inflation “to boost the economy”.
The result is a saving for taxpayers of about R12bn in increases the government would have got without tinkering with tax brackets and R2bn of real relief — in total R14bn of tax savings.
Increases in the brackets and the income thresholds below which you do not pay tax have been increased by 5.2% — more than the inflation rate of 4.5%.
In rand it does not amount to much, but taxpayers will heave a big sigh of relief — rather a small saving than having to find more room to cut more expenses.
Instead, Mboweni is cutting the government’s expenses and particularly government employees’ expenses which he says is necessary to get the government’s house in order. It means we can’t have everything we want to spend money on, he says.
This means you can now earn R83,100 a year (up from R79,000) without paying any tax if you are under the age of 65 and R128,650 (up from R122,300) if you are over the age of 65.
If you are over 75, you can earn up to R143,850 (up from R136,750) before you will pay any tax.
In rand, the tax you pay over the year if you earn up to R150,000 a year (about R12,500 without a bonus) will come down by R738 (or R61.50 a month) if you are under the age of 65.
If you earn R250,000 to R300,000 a year (about R20,800 to R25,000 a month with no bonus), your tax will come down by R1,542 for the year (R128.50 a month).
For higher earners – more than R750,000 a year (about R62,500 a month), your tax will reduce by just over R5,000 for the year or about R417 a month.
Savings are higher for those aged 65 — around R95 a month for those earning R150,000 a year and around R106 a month for those over the age of 75.
On the downside, you can expect your transport costs to go up by 25c/l , 16c for the general levy and 9c for the Road Accident Fund. Smokers and drinkers will also have to bear more budgetary pain with the price of beer, wine, spirits, cigarettes, tobacco and cigars all going up.