The Minister of Finance, Tito Mboweni, delivered the 2019 Budget Speech on the 20th of February 2019.

An election-friendly budget, a “lipstick” budget, a “trying to please everyone” budget, a union-friendly budget, a really tough budget – just some of the terms used to describe this years’ budget by various bodies and, of course, the man in the street!

Here are a few important highlights:

GENERAL

  • Total Income is expected to be around R 1.58 trillion and spending is estimated at around R 1.83 trillion – thus there is. Yet again, an anticipated budget deficit of about R 243bn !!
  • The consolidated budget deficit is projected to narrow from 4.5% of GDP in 2019/2020 to 4% in 2021/2022
  • Gross debt is expected to stabilise at 60.2% of GDP in 2023/2024
  • The economic and revenue outlook has deteriorated since the October 2018 Medium Term Budget Policy Statement
    •  Revenue Collection declined – shortfall is now estimated at R 42.8 billion
    • Major contributing factors – poor tax administration and economic weakness
  • Funding Pressures from SOE’s (state-owned enterprises) have increased dramatically – but something had to be done as the current situation is not sustainable so a “support” package has been committed to
  • The budget proposes tax increases of R 15 billion in 2019/2020 and R 10 billion in 2020/2021 relative to the 2018 Medium Term Budget Policy Statement estimates
  • The additional revenue in 2019/20 will be raised primarily from limiting relief for the effects of inflation on personal income tax
  • Zero-rated VAT items will in future include white bread flour, cake flour and sanitary pads – from 1 April 2019
  • Planned Carbon Tax will now be implemented – 1 June 2019
  • Excise duties on alcohol and tobacco products increase by between 7.4% and 9%
  • Fuel levy increases by 29c per litre (general – 15c, road accident fund – 5c, carbon taxes – 9c)
  • The government has allocated R 567 billion for social grant payments. In 2019, the grant values will increase as follows:
    • R 80 increase for old age, disability, war veterans and care dependency grants
    • R 40 increase for the Foster Care grant
    • R 420 in April and to R 430 in October for Child Care grants
  • As a result of no change to the income tax brackets, (ie to cater for inflation) Government will raise R12.8 billion
  • Visa requirements are being relaxed to make it easier for “much needed and appreciated” tourists to visit South Africa (and to invest !)

THE "LET'S WAIT AND SEE" STUFF

  • No salary increases – for certain Government Departments/entities.
  • Over time, to reduce the “bloated” labour force in Government
  • Offer early retirement packages – this will be expensive but will yield large savings over the next 3 years
  • Curbing government debt – not easy when we are constantly having to borrow money to keep afloat
  • Fix the issues at SARS (ie IT systems, appoint a new commissioner and reopen the Large Business Centre)
  • No “bail-outs” for ailing SOE’s – only “support”, but with strict conditions like assigning “Big Brothers” and “Overseers” to keep an eye on the financial activities  
  • Clampdown on the illicit tobacco industry – we have already seen some significant movement on this front   
  • Getting municipalities to pay their dues to Eskom – another challenge, when most of them can’t even pay their normal monthly commitments
  • Creating a more business-friendly environment to do business in SA – this has to be an ongoing priority   
  • Encourage Equity Partners – private sector partnerships. If structured and managed properly these initiatives can be of huge benefit 

WHAT HASN'T CHANGED

  • Trusts other than special trusts – 45%
  • Dividends Tax – 20%
  • VAT – 15%
  • Company Tax – 28%
  • Retirement Fund lump sum withdrawals and Retirement Fund lump sum benefits and severance benefits – tables remain as is
  • Employer-owned vehicles and Travelling Allowances – remain unchanged 
  • Exempt-Interest:
    • Under 65 years old – first R 23 800
    • Over 65 years old – first R 34 500
    • No change to annual permissible contributions to Tax-Free Savings Accounts

PAYROLL SPECIFIC

  • No changes to Personal Income Tax brackets – but this will catch up with everyone sometime during this year, even those at the lower end of the earnings scale, who traditionally always received some tax relief
  • Tax-free threshold increases from R78 150 to R79 000
  • Medical Tax Credits have not been increased – so belonging to a scheme will inevitably cost more
  • Interest-Free/Low-Interest loans remain as is   
  • Re-imbursive rate per km (ie R 3.61) and the travel table remains the same
  • Subsistence Allowances:
    • R 435 p/d – meals and incidentals
    • R 134 p/d – incidental costs only 
    • SARS published rates for international subsistence – see SARS website 
  • Employment Tax Incentive (ETI) eligible income bands increased:
    • employers will be able to claim the maximum value of R1 000 per month for employees earning up to R 4 500 per month(previously R 4 000)
    • The incentive value will reduce to zero at the maximum monthly income of R 6 500 (previously R 6 000)
    • Effective from 1 March 2019
    • Various other processes will be reviewed to assist employers with the administrative functions required to manage the ETI scheme

TAX RATES FROM 1 MARCH 2019 TO 28 FEBRUARY 2020 INDIVIDUALS AND SPECIAL TRUSTS

TAX REBATES AND TAX THRESHOLDS