By Kenosi Magosha, 27 February 2020
While many people may have been expecting tax increases, she says the good news of real personal income tax relief presents South Africans with an opportunity to re-evaluate their finances and reprioritise their spending – not only now, but also in the future. One area to watch, however, will be how much people spend on sin tax items, so that the extra taxes levied here don’t nullify the disposable income gain.
“The Minister referenced the need to learn how to save during good times, and we will do well to adopt habits and heed the call to plan with the future in mind. A good place to start is to build a nest egg for the future by taking advantage of the increased limit on tax-free savings accounts.”
Magosha says increasing VAT again might not have done much for the economic growth which South Africa needs right now. There were learnings from the experience when VAT was increased two years ago, and notably the South African Reserve Bank (SARB) referenced the fact that the move negatively impacted household consumption and, ultimately, also the growth we were looking for.
“So, the minister has taken the right strategic direction to spare household pockets in the interests of growing the economy through household consumption.”
Apart from the focus on tax, the minister has taken heart of that which impacts ordinary people such as education, employment, home ownership, health and electricity, and has directed focus and expenditure to these areas. For the youth, specifically, Magosha says there’s reason to be hopeful given a clear commitment to continue creating more work opportunities through skills creation and the Jobs Fund. In the context of home ownership, the news that transfer duty will not apply to properties of R1 million (up from R900 000) and less is encouraging news for first-time home buyers, and effectively provides relief from inflation since the last bracket adjustment.
“Treasury had a difficult task in putting this year’s Budget together given the country’s debt levels and the financial challenges linked to SOEs. South Africans should welcome the Budget and what it means not only for them, but for the future and the growth needed in our economy, particularly in the context of support given for the emergence of new businesses.”