On 20 February 2019, the South African Minister of Finance Tito Titus Mboweni delivered the South African budget speech for the 2019/2020 year.
This is the first speech delivered by the Finance Minister Tito Titus Mboweni, and he is also the fourth finance minister of South Africa in three years, which all contributed to slow economic growth, and also placed the South African government and business ethics under intense scrutiny.
It is that time of the year again where the new tax year begins. We advise all individual taxpayers who have included a travel claim in their salary structure to take note of their odometer readings for the coming tax season.
For ease of reference, here is a link to the budget speech: CLICK HERE
Below is a summary of the most important changes that have been made to the tax legislation:
- Tax Proposals
- No changes will be made to personal income tax brackets, while the tax-free threshold increases from R78 150 to R79 000. By not adjusting the income tax brackets for inflation, the government will raise R12.8 billion
- The carbon tax will be implemented on 1 June 2019.
- Below-inflation increases in fuel taxes together with the carbon tax on fuel will raise R1.3 billion.
- Increases in alcohol and tobacco excise duties will raise the revenue of R1 billion.
- White bread flour, cake flour, and sanitary pads will be zero-rated for VAT purposes from 1 April 2019.
- The eligible income bands for the employment tax incentive will be increased from 1 March 2019.
- Spending programmes
- Total public spending over the MTEF period is expected to be R5.9 trillion.
- The bulk of spending is allocated to learning and culture, social development, health, and community development.
- The expenditure ceiling is increased by R16 billion over the next three years, mainly due to provisional allocations for reconfiguring Eskom, which amount to R69 billion.
- Compensation of employees remains the largest category of spending, accounting for an average of 34.4 percent of consolidated expenditure over the MTEF period. Measures are introduced to realise a R27 billion reduction in compensation.
- Funds amounting to R33.4 billion have been reprioritised over the MTEF period, mainly for service delivery and infrastructure.
- Budget Framework
- Over the medium term, spending reductions amount to R50.3 billion, 54 percent of which comes from compensation budget adjustments.
- Provisional allocations of R75.3 billion are budgeted over the 2019 medium-term expenditure framework (MTEF) period, mainly for Eskom’s reconfiguration plan.
- Since the 2018 Medium Term Budget Policy Statement the contingency reserve has been increased by R6 billion in 2019/20 to respond to requests for fiscal support from smaller state-owned companies. Additional support will be financed by selling non-core assets.
- The consolidated budget deficit is projected to narrow from 4.5 percent of GDP in 2019/20 to 4 percent in 2021/22.
- Gross debt is expected to stabilise at 60.2 percent of GDP in 2023/24.
- Real growth in consolidated non-interest expenditure will average 2 percent over the next three years.
Please also take note of the following tax deadlines for the coming year:
- Provisional taxpayers (and companies with a February year end)
- 1st Provisional tax payment 31 August 2019
- 2nd Provisional tax payment 29 February 2020
- 3rd Provisional tax payment 30 September 2020
- Non-Provisional taxpayers
- Income tax submission deadline 31 October 2020
- EMP501 submissions
- 31 May 2019 (for the 2018/2019 year – Final submission)
- 31 August 2019 (for the 2019/2020 year – First submission)