Sitting through the budget speech is not really high up on the list of priorities of the average small business owner. Here are some of the highlights, specifically related to the tax consequences going forward.
First off, it came as a relief that the VAT rate was not adjusted, as many experts expected it would be. Treasury did not record their predicted revenue increase after the last adjustment from 14% to 15%, and coupled with the negativity around that hike, this was welcome news.
Secondly, South African individual taxpayers will have a few extra rands in their pockets as real tax relief was provided for personal income tax. This means that the tax brackets and rebates were adjusted, above inflation, which is great news for already cash-strapped pockets. A taxpayer earning R10 000 per month will see a 10% reduction in their taxes, whilst someone earning R100 000 per month will pay about 1.5% less.
For those businesses that are classified as small business corporations for income tax purposes, the thresholds were adjusted accordingly. The first R83 100 of their taxable income will be taxed at 0%.
Minister Mboweni also proposed a broadening of the corporate income tax base to enable a reduction to the corporate tax rate in the near future. This will stimulate growth in the business sector and assist in the unemployment issues we are facing.
Now for the not-so-good news:
We saw an increase in the fuel levy by 25c/litre, which will affect South Africans across the board. An increase in the plastic bag levy of 25c was also announced.
Further, a restriction has been placed on the ability of companies to fully offset assessed losses from prior years against their current year taxable income.
There are mixed views regarding the minister’s budget, with the proposed cut in the government’s wage bill being the main hurdle. It remains to be seen what effect this will have.
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