CRS News Flash 23 February 2023 – Budget Speech and Tax Proposals for 2023-2024
FEBRUARY 2023 – SOUTH AFRICA 2023/2024 BUDGET SPEECH It is important that employers note the following:
2023/2024 Budget Speech and important changes affecting payroll
The Minister of Finance, Enoch Godongwana, delivered the Budget Speech for the fiscal year 2023/2024 on Wednesday, 22 February 2023.
Highlights of the budget speech:
· The consolidated budget deficit is projected to decline from 4.2% of GDP in 2022/23 to 3.2% of GDP in 2025/26.
· Real GDP growth is projected to an average of 1.4% from 2023 to 2025, compared with 1.6% estimated in October.
· Government debt is high. A commitment to absorb R254 billion of Eskom debt, high interest repayments and other spending commitments will see the country’s debt peak at 73.6% of GDP, or R5.84 trillion, by 2025/26.
· Because debt is high, debt-service costs are projected to average R366.8 billion annually over the medium term, reaching R397.1 billion in 2025/26.
· The debt-relief arrangement for Eskom consists of two components.
· One is R184 billion. This represents Eskom’s full debt settlement requirement in three tranches over the medium term.
· Second is a direct take-over of up to R70 billion of Eskom’s loan portfolio in 2025/26. Because of the structure of the debt relief, Eskom will not need further borrowing during the relief period.
· Certain conditions must be met.
· A 1% increase in inflation and interest rates, together with a R1 depreciation of the rand against the dollar, results in a R54.9 billion increase in gross loan debt and a R6.2 billion increase in debt-servicing costs.
· The Treasury has also announced R13 billion in tax relief, with R9 billion going to businesses and households for investment in renewable energy.
· The general fuel levy and the Road Accident Fund levy will not be increased this year.
· Tax revenue collections for 2022/23 are expected to total R1.69 trillion. This exceeds the 2022 budget estimate by R93.7 billion, and the 2022 MTBPS estimate by R10.3 billion. As a result, there are no major tax proposals in this budget.
Tax proposals
· Businesses will receive tax deductions for investment in wind, solar, hydropower, biomass and other renewable energy projects they undertake.
· Households that purchase rooftop solar panels will be credited with a tax rebate of 25% of the cost of installing new and unused solar panels, capped at a maximum of R15,000.
· The personal income tax brackets will be fully adjusted for inflation, which will increase the tax-free threshold from R91 250 to R95 750.
· Medical tax credits will also be increased by inflation to R364 per month for the first two members, and to R246 per month for additional members.
· The retirement tax tables for lump sums withdrawn before retirement, and for lump sums withdrawn at retirement, will be adjusted upwards by 10%. This means that the tax-free amount that can be withdrawn at retirement increases to R550 000.
· Government intends to publish revised draft legislation on the ‘two-pot’ retirement system. This will include details on the amount that could be immediately available when the system is implemented from 1 March 2024. Any withdrawals from the accessible “savings pot” would be taxed as income in the year of withdrawal.
Medical tax credits
Retirement fund lump sum withdrawal benefits
Retirement fund lump sum benefits or severance benefits
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 defray:
· Incidental costs only, an amount equal to R161 per day; or
· The cost of meals and incidental costs, an amount equal to R522 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 defray 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.
· 80% of the travelling allowance must be included in the employee’s remuneration for the purpose 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.
SARS rate per kilometre in respect of motor vehicles
AA rate per kilometre
Where the reimbursed rate exceeds the prescribed rate of R4.64 (previously R4.18) cents per kilometre, irrespective of the business kilometres travelled, there is an inclusion in remuneration for PAYE purposes. The full inclusion amount is subject to PAYE, unlike the fixed travel allowance where only 80% of the amount is subject to PAYE.
However, this alternative is not available if other compensation in the form of an allowance or reimbursement (other than for parking or toll fees) is received from the employer in respect of the vehicle.
To view the official Budget Speech, follow the link.
The view the notices in respect of the fixed rate per kilometre and the daily amount in respect of meals and incidental costs, follow the link.
