The National Budget Speech is a much anticipated event every year and while many of us are keen to hear how much more we will pay for petrol and beer, there are other critical components that are well worth considering. After all, our country’s budget is no different to our own budgets with a focus on finding a balance between income and expenses. (Our own budgets are perhaps just not so exciting).
When we look at the Budget Speech we need to consider the (a) “revenue section”, which shows where the Government expects to get the money from, as well as the (b) “expenses section” which deals with how the Government will use our collective tax money to provide services to all of us.
What is the The Budget Speech?
The Budget Speech deals with income and expenses over the next year, but also relates to more medium term spending as well as some very long-term implications for the financial situation of consumers.
Basically, the Minister gives us a glimpse of changes to the financial world that will affect some of the benefits we receive such as medical and retirement benefits. Typically, the Minister will also highlight certain issues that are yet to be legislated, but is tabled to give an indication of Government’s perspectives; and is likely to be discussed further with industry and other bodies. In this context, a significant focus of the 2013 Budget Speech was the continued consideration of retirement savings reforms.
But, how will the Budget affect our pockets in the short term?
Impact on different taxes
The combined impact of the changes to the different tax systems will affect how much you receive of your salary every month (income tax and deductions), how much you pay for certain things (VAT and sin taxes), as well as how much you need to pay when you sell certain assets (Capital Gains Tax).
Over the last number of years we have all started to expect personal tax relief that at least partially compensated for the effect of inflation (also known as “bracket creep”). It was widely speculated that the Minister might increase personal income tax during this Budget, but it was pleasing to see that the Minister did not do so.
There was mention of personal income tax relief of R7 billion. How much of this will reach your pocket, depends on how much you earn. For example, someone earning taxable income of R300 000 will have paid R66 300 in taxes, based on the old tables (before rebates and deductions) - and will now be paying R65 471 - a saving of R830.
For taxpayers below the age of 65 the primary rebate has increased from R11 440 to R12 080. This is the amount that you can deduct from the income tax you pay every year. Taking these rebates into account, the person will now pay income tax of R53 391, compared to the R54 860 in the last tax year. This translates to a total saving of R1 469.
For someone earning R180 000 this saving amounts to R1 032 per year.
As has been the pattern over the last number of years, there has also been an increase on most of the sin taxes. The duties on tobacco products will increase between 5.7% and 10%.
There will be an overall increase in the fuel levies, including the Road Accident Fund levy, from April 2013. For every litre of petrol you will pay a net amount of 23c more or if you fill up a 60 litre tank it will cost you an additional R13.80.
Medical tax credits
The medical tax credits will be increased from R230 to R242 for the first two beneficiaries and from R154 to R162 for every beneficiary thereafter. This means that for a family of four your medical credits will increase from R768 to R808 resulting in a monthly saving of R40.
From 1 March the tax-free interest income will increase from R33 000 to R34 500 if you are 65 years and older; and from R22 800 to R23 800 for individuals under 65 years. This means that you will not pay tax on the first R23 800 interest you earn if you are younger than 65.
Click here to see how you will be affected in the long run.