While the process of budgeting for the country in an uncertain environment considering power outages and with no end in sight soon for the wows of Eskom is difficult to predict meaningful growth, Treasury has managed to provide some much-needed guidance.

Inflation

Inflation worldwide is a key concern and needs to be monitored carefully, as this significantly impacts your savings and expenditure. In addition, it drives the cost of household expenditure across all areas of your spending.

Returns on investments in a high-inflation environment usually are under significant pressure, and the costs associated with healthcare and related expenses become extremely difficult to contain. The same should be said for, food items and education.

To this effect, we see that the budget has made inflation adjustments to the personal income tax tables, which will offer relief to taxpayers. In addition, this relief has also been extended to the retirement tables, ensuring that those drawing pensions or planning to retire should find some relief and increased liquidity. On retirement, the tax-free amount that can be withdrawn will increase to R550 000 from the current R500 000.

Medical tax credits will increase from R347 to R364 per month for the first two members and from R234 to R246 per month for additional members.

The R350 grant was also extended for another year, which could total a cost of around R55 billion.

Consideration has been extended for those buying properties, thus assisting the young emerging and middle-class to secure homes. It should be noted that this adjustment to transfer duty also assists in the costs related to estate planning and winding up thereof. The brackets of the transfer duty table will also be increased by 10%, allowing properties below R1.1 million to avoid any transfer duty payments.

As has become the expected practice, exercise duty for alcohol and tobacco has been increased by 4.9% in line with expected inflation.

Fuel Levy and Related Taxes

It remains an important component of and driver of costs for households, particularly in areas of food prices and simply getting to places of employment. To this end, the government has remained committed to reviewing the components of the fuel levy. What is a relief is that the diesel(fuel) rebate has been extended to manufacturers of foodstuffs for a period of 2 years. These rebates must translate to pegging some of the otherwise cost pressure on logistics associated with packaged food products, and thus relief at the till.

Households with the means to install solar panels will also enjoy compensation and cost refunds. However, it should be noted that this must be done with a careful review of the terms and conditions associated with this proposed relief. Businesses and households that install solar solutions to mitigate load shedding also received relief of around R13 billion.

In conclusion, you would be advised to engage your financial advisor for a more personalized impact to ensure that you and your budget are aligned and can maximize opportunities and savings.

Author: Reynold Patrick King
Managing Director
Phoenix Employee Benefits 

DISCLAIMER

This blog does not constitute financial advice. The content is intended to provide information for educational purposes. We recommend that interested parties contact Phoenix at the contact details listed or their financial advisors for a comprehensive review and needs analysis followed by the required record of advice.