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FEBRUARY 2020 – SOUTH AFRICA

2020/2021 BUDGET SPEECH

It is important that employers note the following:

South Africa 2020/2021 Budget Speech and important changes affecting payroll

The Minister of Finance, Tito Mboweni, delivered the Budget Speech for the fiscal year 2020/2021 on 26 February 2020.

Highlights of the Budget Speech summarised:

  • A consolidated budget deficit of R370.5 billion, or 6.8% of GDP in 2020/21, is projected.
  • Gross national debt is projected to be R3.56 trillion, or 65.6% of GDP by the end of 2020/21.
  • Revenue is projected to be R1.58 trillion, or 29.2% of GDP.
  • Government has allocated R230 billion over ten years to the restructuring of the electricity sector and the achievement of a stable electricity supply. The current electricity shortfall will ease as Eskom finishes critical maintenance.
  • SAA has been placed under business rescue and will undergo radical restructuring. Government allocated R16.4 billion to settle guaranteed debt and interest. The associated restructuring costs will be reprioritised within the Budget.
  • No major tax increases have been proposed.
  • There will be some personal income tax relief.
  • Excise duties have been increased to keep pace with inflation.
  • To adjust for inflation, the fuel levy increases by 25 cents per litre, of which 16 cents is for the general fuel levy and 9 cents for the Road Accident Fund levy.
  • The following adjustments to social grants were announced:
  • Old age, disability and care dependency grants increase by R80 to R1860 per month.
    – The war veterans grant increases by R80 to R1880 per month.
    – The foster care grant increases by R40 to R1040 per month.
    – The child support grant increases by R20 to R445 per month.
  • Government will reduce the public sector wage bill as a share of overall spending. Last year the finance minister announced measures to realise a R27 billion reduction in the state salary bill over three years by incentivising early retirement in the public sector. This year the cuts are going far deeper. National Treasury has proposed a R160.2 billion cut in the wage bill for state employees in national and provincial departments over three years.
  • SAA has been placed under business rescue which will lead to a radically restructured airline. Over the medium term, Government has allocated R16.4 billion to settle guaranteed debt and interest.
  • National Treasury intends reducing SA’s 28% corporate income tax rate.

Tax rates from 1 March 2020 to 28 February 2021:

Trusts other than special trusts: tax rate of 45%

Tax rebates and tax thresholds:

 

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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RS Technologies (Pty)Ltd. All Rights Reserved.

OCTOBER 2019 – SOUTH AFRICA
MEDIUM TERM BUDGET STATEMENT

It is important that employers note the following:

South Africa Medium-Term Budget Policy Statement 2019

The Minister of Finance, Minister Tito Mboweni, delivered the Medium-Term Budget Policy Statement on Wednesday, 30 October 2019.

Fiscal goals and projections for the economy, as well as the risks facing the country were addressed.

Highlights summarised

  • Economic growth is forecast at 0.5% in 2019 compared to the 1.5% expected in February. Growth is projected to slowly rise to 1.7% in 2022.
  • E-tolls are here to stay, and the government plans to enforce compliance
  • Total revenue shortfall for 2019-2020 will amount to R52.5 billion compared with the 2019 Budget estimates. This could result in job losses, lower wage settlements, smaller bonuses and a decline in income tax collection.
  • Tax collection is expected to total R1.37 trillion this year, which is R53 billion (or 4%) less than expected.
  • National debt exceeded R3 trillion. It is expected to rise to R4.5 trillion over the next three years. Without any policy adjustments, debt will most likely exceed 71% of GDP by 2022/2023.
  • The National Treasury, in partnership with the Department of Public Enterprises, is instituting a series of measures to instil discipline in Eskom’s finances. Debt relief will only be considered once operational efficiencies have been achieved.
  • The consolidated budget deficit averages 6.2% of GDP over the next three years.
  • Regarding economic growth, the current account deficit is expected to remain at 3.5% of GDP over the next three years, reflecting low import growth due to weaker domestic demand.
  • Almost half of all projected spending is allocated to social grants, education and healthcare, which will receive R3 trillion alone over the next three years.
  • The rollout of the National Health Insurance (NHI) Bill will require an additional R33 billion annually from the 2025/26 financial year. Treasury and the health department are still in discussions around NHI.
  • Luxury expenses are being withdrawn from politicians. This includes salary freezes, cuts in taxpayer-funded cars, clamp downs on expensive phones, no more business class flights and restrictions on travel and subsistence expense claims.
  • R2.3 billion will be allocated to fighting crime and tax avoidance.
  • The South African Reserve Bank will not be nationalised as it kept inflation stable during a difficult period. The bank also declared a substantially increased profit share to the government.
  • The official unemployment rate has increased to 29%, up from 27% a year ago.
  • The mid-term Policy Statement does not include detailed spending plans or tax proposals. This will be announced during the annual Budget Speech in February 2020.

To view the Medium-Term Budget Policy Statement (MTBPS), follow the link

Contact our legislation team at info@crs.co.za if you require any additional information.
© 2019 C
RS Technologies (Pty)Ltd. All Rights Reserved.

If South African businesses were in the dark about what lies ahead financially, Finance Minister Tito Mboweni made things very clear in his 2019/2020 Budget Speech and important changes affecting payroll.

This budget will affect the pockets of employees and employers, and businesses need to pay close attention to several aspects that will impact on Payroll – that is if they want to cut costs, remain agile and continue to be competitive.

Of course as your trusted HCM, HR and Payroll partner, we’ve highlighted these points, those that will impact either directly or indirectly on corporate fiscal management going forward.

  • The budget proposes tax increases of R15 billion in 2019/20 and R10 billion in 2020/21 relative to the 2018 MTBPS estimates. The additional revenue in 2019/20 will be raised primarily from limiting relief for the effects of inflation on personal income tax
  • Carbon Tax will be implemented on 1 June 2019
  • Fuel levy increases by 29c per litre
  • The government has allocated R567 billion for social grant payments. In 2019, the grant values will increase as follows:
  • R80 increase for old age, disability, war veterans and care dependency grants
  • R40 increase for the foster care grant to R1 000

The child support grant will increase to R420 in April and to R430 in October.

It is important to note that there are no changes to personal income tax brackets, while the tax-free threshold increases from R78 150 to R79 000. This is a way for the government to generate revenue – by not adjusting the income tax brackets for inflation the government will raise R12.8 billion.

Medical tax credits have not changed.

The ETI will be increased from 1 March 2019. From this date employers may now claim R1 000 for employees earning R4 500 monthly and the incentive will reduce to zero when an employee earns  a monthly income of R6 500.

South African citizens who spend more than 183 days in employment outside South Africa will have to pay income tax on foreign employment income that exceeds R1-million.

Click through to www.crs.co.za or email info@crs.co.za or for more information on tax rates from 1 March 2019 to 28 February 2020,

As always CRS has the expertise and resources to guide all our clients.

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Tel: +27 11 2594700
Email: info@crs.co.za

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