Helpful thoughts for everyday South Africans on the 2018 Budget Speech

Mar 16, 2018

In February 2018, Minister of Finance, Malusi Gigaba gave the annual budget speech for South Africa. Although there's always quite a buzz about this, it's mostly confined to the gurus who understand the impact of this speech on the South African economy and its citizens.

Many everyday South Africans don't really grasp all the information shared in this speech and therefore don't really care much more than knowing they'll pay more for hobbies like boozing or smoking.

Even though we can't make it all make sense to the everyday person, we thought we'd do our best to compile the facts & figures most likely to make sense to the everyday person! Below is a short summary of some budget speech 2018 sections that will interest the majority of South Africans.

(It's important to note that many of these things are only proposals made by the Minister of Finance. The final legislation may differ from these proposals but does in most case conclude the same)

Highlights (or need to know) for the everyday South African

  • VAT increases from 14% to 15% (effective 1 April 2018) if the legislation passes
  • Increased Excise Duties on tobacco & alcohol products (a price increase can thus be expected on these products)
  • 6 Special economic zones have been approved for tax relief
  • Increases in the General Fuel Levy (22 cents) and the Road Accident Fund (30 cents) per litre effective 4 April 2018
  • Increased Environmental Tax on plastic bags, incandescent light bulbs, vehicle emissions and the new health promotion levy on sugary beverages (effective 1 April 2018)
  • Roughly R57 billion has been allocated to free tertiary education over the medium term
  • The economic growth outlook for 2018/2019 sees chances of improving
  • Overall, the government will be spending R205 billion on health in 2018/2019 and is expected to grow to R240 billion by 2020/2021.

Wait a minute, where's my money going!

These are the main categories where money will be spent for South Africa:

  • Learning & Culture R351.1bn
  • Social Development R259.4bn
  • Economic Development R200.1bn
  • Peace & Security R200.8bn
  • Health R205.4bn
  • General Public Services R64bn
  • Community Development R196.3bn
  • Debt Service Cost R180bn

VAT

There is much debate whether this is good or bad and it's worth to read up on it if you'd like to hold your own at the next braai.

  • Rate increases to 15% effective 1 April 2018
  • Compulsory VAT registration if your turnover is more than R1 million per year (this remains unchanged from 2017)

Personal tax for individuals

This information is likely to affect most South Africans apart from the proposed VAT increase:

  • Lowest tax rate of 18% applicable on taxable income up to R195 850 (R189 880)
  • The marginal rate is at 45% on taxable income above R1 500 000 (unchanged)
  • Rebate under 65 years of age – R14 067 (R13 635)
  • 65 years and older – R21 780 (R21 114)
  • 75 years and older – R24 354 (R23 607)
  • Interest exemption under 65 years of age – R23 800 (unchanged)
  • 65 years and older – R34 500 (unchanged)
  • Tax threshold R78 150 (R75 750)
  • 65 years and older – R121 000 (R117 300)
  • 75 years and older – R135 300 (R131 150)

Medical fund contributions qualify for medical tax credits per year of R3 720 (R3 636) per person for the first two members and R2 508 (R2 448) per person for each additional member.

Effective tax rebate in respect of medical costs and fund contributions:

  • 25% of the cost
  • 33.3% of the cost for a person older than 65 years or in case of disability

Retirement fund contributions deductible:

  • 27.5% of taxable income, maximum R350 000 per year.

Some good news for the Startups and SME's

A fund with an allocation of R2.1 billion over the medium term is being developed between the Departments of Small Businesses, Science and Technology and the National Treasury to benefit small and medium enterprises during the early start-up phase.

Spending programmes over the next 3 years (helping SA to help itself)

Over the next three years, the government will spend R528.4 billion on social grants. This is where it's most likely to go:

  • In total, R324 billion is provided for higher education and training, including R57 billion
  • of new allocations for fee-free higher education and training.
  • R792 billion on basic education, including R35 billion for infrastructure, and R15.3 billion
  • for learner and teacher support materials, including ICT.
  • R667.8 billion on health, with R66.4 billion on the HIV, AIDS and TB conditional grant.
  • R123.3 billion on subsidised public housing.
  • R125.8 billion on water infrastructure and services.
  • R207.4 billion on transfers of the local government equitable share to provide basic
  • services to poor households.
  • R129.2 billion to support a ordable public transport

The Old age, disability and care dependency grants will increase on 1 April 2018 from the existing R1600 by R90 to R1690 and by a further R10 to R1700 on 1st October 2018.

The Child Support grant will increase from the baseline of R380 to R400 on 1 April and to R410 on 1 October. This is a 6.6% annual increase.

We trust every person has something they can take and use from this 2018 budget speech overview. Let's make it an open conversation for all South Africans, feel free to share, comment and talk to us about what you think!

To your better financial future!

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