What does the 2023 Budget mean for you?

What does the 2023 Budget mean for you?

Finance Minister Enoch Godongwana delivered his second national Budget speech on Wednesday, 22 February 2023, afternoon, saying “National Treasury has a fiscal strategy to balance it all”.
Tax revenues for 2022/23 are expected to be R94 billion higher than was estimated at the time of 2022 Budget and about R10 billion higher than the estimate in the October 2022 mini budget, mainly due to corporate taxes.
No high tax increases, in fact tax relief for individuals and businesses in the form of incentives for investment in solar generation.

In summary, the 2023 budget consisted of the following:

1. R7.08 trillion has been allocated to total government spend, of which R370 billion (51%) has been allocated to the social wage bill.

2. R14 billion has been allocated to fight crime and corruption
   • 8 billion Police service
   • 1 billion Department of defence
   • 3 billion National Prosecuting Authority
   • 3 million Financial Intelligence Centre
   • R100 million Special investigation unit

3. R9 million tax incentives for investing in renewable energy and increasing electricity generation.
   • Business (From 1 March 2023) will be able to claim a 125% deduction in the first year for all new renewable energy projects brought into use until February 2025 as from next month, including wind, concentrated and photovoltaic (PV) solar, hydropower and biomass, which creates a cash flow benefit in the early years of a project, depending on the level of power produced. R5 billion has been set aside by National Treasury for this.
   • Government will guarantee solar-related loans for small and medium enterprises on a 20% first-loss basis. The Energy Bounce Back Scheme will be launched in April 2023.
   • Private households (From 1 March 2023) will be able to claim a 25% rebate on the cost of solar photovoltaic (PV) rooftop panels. The benefit of up to R15,000 per individual is available on solar panels purchased and installed at a private residence between March 2023 and February 2024. The rebate is only available for solar PV panels and not on inverters or batteries. R4 million has been allocated to this.

4. The increase on alcohol (wine, beer and spirits) and tobacco is 4.9% and sparkling wine will be increasing by 0.7%.
5. R695 million has been allocated to disaster relief
6. No increase in fuel and RAF levies. A refund on the RAF levy for diesel used in the manufacturing process is proposed to be made available to manufacturers of foodstuff from 1 April 2023 for a period of two years ending 31 March 2025.
7. An inflation-adjustment to the individual tax brackets has been made, as well as a change to the retirement tax tables.
8. R254 million of Eskom debt will be transferred to the government balance sheet over the next three years towards paying down capital R168 billion and interest R86 billion, subject to strict conditions.

Personal taxes
Personal income tax brackets will be adjusted by 4.9%, with the result that inflationary increase in the personal income tax brackets and rebates, will result in relief of R15.7 million.

New personal tax brackets effective as from the 1st March 2023:

• The maximum rate of 45% applies to taxable income of more than R1,817,001 (up fromR1,731,600), while the lowest rate of 18% applies to taxable income up to R237,100 (up fromR226,000) with similar adjustments applied to the brackets in between.

Threshold (the amount above which income tax becomes payable)
For the 2023 year of assessment R95 750 (R91 250 2022) if you are younger than 65 years.

Medical Aid Credits
As from 1 March 2023, the medical tax credit available to taxpayers who are members of medical aid schemes have been increased from R347 to R364 per month for each of the first 2 dependents and from R234 to R246 per month for every subsequent dependent.

Retirement
The brackets for transfer duties, retirement fund lump sum benefits and retirement fund lump sum withdrawal benefits will all be adjusted upwards by 10% to compensate for inflation, whilst tax rates remain unchanged.

As from 1 March 2023, the amount which can potentially be paid tax-free upon retirement from a retirement fund or as a severance benefit from an employer has been increased from R500,000 to R550,000 and the level at which the maximum rate of 36% is applicable has increased from R1,050,000 to R1,155,000, with similar adjustments applied to the two levels in between.

With regards to Retirement fund withdrawal benefits, the maximum potential tax-free limit has increased from R25,000 to R27,500 and the maximum rate of 36% now applies to amounts more than R1,089,000, up from the previous level of R990,000, with similar adjustments applied in between.

Exemption for interest and dividend income
The annual exemption on interest earned by individuals younger than 65 years (R23 800) and for individuals 65 years and older (R34 500) remains the same. The annual contribution limit to tax-free investments remains R36 000.

Tax-free Allowances
Increases have been announced in respect of tax-free subsistence allowances that can be paid to employees spending time away from their usual residences for work purposes for incidental costs, or meals and incidental costs (R152 to R161 and R493 to R522 respectively). The tax-free travel reimbursement rate that can be paid to employees for business travel under certain circumstances is up from R4,18/km to R4,64/km.

Companies
Company tax rate now reduces to 27%, all though it was introduced in last year’s budget, it only takes effect now with corporate income tax rate reduced to 27% for companies with a year of assessment ending between 1 April 2023 and 31 March 2024.

The 2023 budget is best described as neutral, with no extreme highs or lows. The full budget speech can be found at
https://www.gov.za/speeches/minister-enoch-godongwana-2023-budget-speech-22-feb-2023.