News FlashesFebruary 24, 2022

CRS News Flash 24 February 2022 – SOUTH AFRICA – 2022/2023 Budget Speech and Tax Changes

FEBRUARY 2022 – SOUTH AFRICA
2022/2023 BUDGET SPEECH AND TAX CHANGES
It is important that employers note the following:

South Africa 2022/2023 Budget Speech and important changes affecting payroll

The Minister of Finance, Enoch Godongwana, delivered the Budget Speech for the fiscal year 2022/2023 on Wednesday, 23 February 2022.

Highlights of the Budget Speech:

·        Government expects to achieve a primary surplus – where revenue exceeds non-interest expenditure – by 2023/2024. In 2024/2025, main budget non-interest expenditure will grow slightly above CPI inflation.

·        The consolidated budget deficit is projected to narrow from 6% of GDP in 2022/2023 to 4.2% of GDP in 2024/2025.

·        Gross loan debt will stabilise at 75.1% of GDP in 2024/2025.

·        Debt-service costs consume an increasing share of GDP and revenue. They are expected to average R333.4 billion a year.

·        Total consolidated government spending will amount to R6.62 trillion over the next three years, and the social wage will take up 59.4% of total non-interest spending over this period.

·        Additional allocations of R110.8 billion in 2022/2023, R60 billion in 2023/2024 and R56.6 billion in 2024/2025 are made for several priorities that could not be funded through reprioritisation. These include the special COVID-19 social relief of distress grant, the continuation of bursaries for students benefiting from the National Student Financial Aid Scheme, and the presidential employment initiative.

·        The bulk of the spending is allocated to learning and culture (R1.3 trillion), social development (R1 trillion) and debt-service costs (R1 trillion) over the MTEF.

·        Economic development and community development grow faster than other functions at 8.5% and 7.9%, respectively.


Tax proposals:

·        Tax revenue strengthened significantly in recent months and is expected to reach R1.55 trillion for 2021/2022, well above projections.

·        Given the revenue improvement, government proposes R5.2 billion in tax relief to help support the economic recovery, provide some respite from fuel tax increases and boost incentives for youth employment.

·        Most of the relief is provided through an adjustment in personal income tax brackets and rebates. In addition, there will be no increase in either the general fuel levy or the Road Accident Fund levy.

·        Progress continues to be made in rebuilding the South African Revenue Service.

Payroll changes:

·        Tax brackets adjusted.

·        Medical tax credits increased.

·        Tax rebates and tax thresholds increased.

·        Employment tax incentive. To encourage businesses to employ young people, government proposes an increase of 50% in the value of the employment tax incentive, effective from 1 March 2022. The incentive will increase from a maximum of R1 000 to a maximum of R1 500 per month in the first 12 months, and from R500 to a maximum of R750  in the second 12 months of eligibility.

Trusts other than special trusts: tax rate of 45%

Medical tax credits

Subsistence allowances

Where the accommodation to which that allowance or advance relates is in the Republic and that allowance or advance is paid or granted to cover:

·        incidental costs only, an amount equal to R152 per day; or

·        the cost of meals and incidental costs, an amount equal to R493 per day; or

·        where the accommodation to which that allowance or advance relates is outside of the Republic and that allowance or advance is paid or granted to cover the cost of meals and incidental costs, an amount per day determined in accordance with the ‘Table: Daily Amount for Travel Outside the Republic’ under Notice 268 published in Government Gazette No. 42258 dated 1 March 2019.

Travelling allowance

Rates per kilometre, which may be used in determining the allowable deduction for business travel against an allowance or advance where actual costs are not claimed, are determined using the table published on the SARS website www.sars.gov.za, under Legal Counsel/Secondary Legislation/Income Tax Notices/Fixing of rate per kilometre in respect of motor vehicles.

Note:

·        80% of the travelling allowance must be included in the employee’s remuneration for the purposes of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.

·        No fuel cost may be claimed if the employee has not borne the full cost of fuel used in the vehicle, and no maintenance cost may be claimed if the employee has not borne the full cost of maintaining the vehicle (e.g. if the vehicle is covered by a maintenance plan).

·        The fixed cost must be reduced on a pro-rata basis if the vehicle is used for business purposes for less than a full year.

·        The actual distance travelled during a tax year, and the distance travelled for business purposes substantiated by a log book, are used to determine the costs which may be claimed against a travelling allowance.

Retirement fund lump sum withdrawal benefits

Retirement fund lump sum benefits or severance benefits

To view the official Budget Speech, follow the link.

 

 

Contact our legislation team at info@crs.co.za if you require any additional information. 

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