The Honourable Finance Minister Enoch Gondongwana delivered his maiden budget speech, which was well-received by various sectors of the economy. The budget presented was balanced and sensible, acknowledging that an increased tax burden would threaten economic recovery.

Government reiterated its commitment to structural reforms designed to lower the cost of conducting business and to create a more competitive economy. Over the next few months, the following reforms are expected to be fast-tracked:

• Accelerating infrastructure investment.
• Diversifying energy generation to alleviate electricity supply shortages and taking additional steps towards a competitive energy market.
• Releasing broadband spectrum, with the auction process starting on 1 March 2022.
• Opening third-party access to the freight rail network by the end of 2022 to increase capacity.
• Starting the eVisa system rollout by March 2022 to promote tourism.
• Reviewing the legal framework governing skilled migration.

Key highlights from the budget speech:

• The budget will focus on structural reforms and infrastructure to improve revenue, employment, and confidence in the country’s economic recovery.
• A reduction in the corporate tax rate from 28% to 27% for years of assessment ending on or after 31 March 2023.
• A 4.5% inflationary adjustment on all personal income tax brackets, rebates, and medical tax credits.
• The tax-free threshold for taxpayers under 65 years has increased to R91 250 (previously R87 300).
• Taxpayers over 65 but below 75 years of age will have their first R141 250 of income tax-free (previously R135 150) and those taxpayers over 75 years of age will have their first R157 900 of income tax-free (previously R151 100). 

The revised tax table for individuals is as follows:

• For the first time since 1990, there will be no increase in the fuel levy or the Road Accident Fund levy.
• No increase in interest withholding tax rates, VAT, or capital gains tax inclusion thresholds.
• Allocation of R58.6 billion over the medium term for various social grants.

Employment Tax Incentive (ETI)

One of the greatest challenges facing South Africa is the high unemployment rate, which especially impacts the youth. Elevated levels of unemployment have a profound impact on the socio-economic fabric of South Africa.

To encourage businesses to employ young people, an increase of 50% in the value of the employment tax incentive (ETI), effective from 1 March 2022, has been proposed. If an eligible and tax compliant employer hires a qualifying employee (a person who is between the ages of 18 years and 29 years and 11 months), the employer can deduct the ETI amount from the total amount of employees’ tax payable to SARS.

The ETI will therefore increase from a maximum of R1,000 to a maximum of R1,500 per month in the first 12 months, and from a maximum of R500 to a maximum of R750 in the second 12 months of eligibility.

The ETI is constantly being refined and expanded, so it is important for employers claiming the ETI to keep their fingers on the pulse to ensure that they remain within the bounds of the ETI Act and to respond to Government’s call to assist with decreasing the high unemployment rate.

For more information on the above and other tax changes please refer to the 2022/2023 tax guide.

Aneesa Khan, Finance Manager