Six things you need to know about Budget 2020
Budget 2020 introduced not just a few changes to existing taxes for businesses and individuals but also brings in new rules on how certain kinds of employees should be paid.
Here are highlights of the main changes.
Personal Income Tax
“Our pockets will welcome the personal income tax relief Minister Mboweni has granted through an above inflationary adjustment. But in the absence of a VAT increase or other tax hikes, one wonders how the government plans to reduce its deficit in years to come.”
National Minimum Wage
“Old-age grants were increased to R1860 per month or nearly half the minimum national wage of R3500 per month. Curiously, there is no alignment between the two. Unions and workers were not happy with a 3.8% increase in the national minimum wage, so I did expect the Minister to talk about how the minimum wage would be transitioned to a living wage in the years to come.”
“As expected, medical tax credits were adjusted below inflation to help fund the rollout of National Health Insurance (NHI). The Minister did not say anything more about how NHI will be funded in the future. Each year that passes without clarification causes more anxiety for stakeholders. It is clear from the Budget Speech, however, that the original deadlines are not feasible, given the current economic climate and government’s lack of capacity.”
Foreign Income Exemption threshold
“The so-called expat tax only comes into effect on 1 March 2020, and already the Minister is proposing that it will be increased from R1 million to R1.25 million for the same tax year. People who would be affected will welcome this news, especially given the weakening of the rand this year. The Minister also said the process of financial emigration through the Reserve Bank would be phased out. Those that kicked off the financial emigration process in anticipation of the expat tax may thus no longer achieve the benefits they were aiming for. We need clarity, but it will be more difficult to break tax ties with South Africa through financial emigration as recognised by the Reserve Bank.”
“During the State of the Nation Address, the President said the government was going to scale up the Youth Employment Services programme. I would have wanted the Finance Minister to namecheck this initiative and encourage businesses to participate. He missed a golden opportunity to market this programme to South African businesses.”
Simplified tax administration
“One of these days, employees won’t have to file individual tax returns and the annual reporting of PAYE will be simplified for employers. This is good news since all salaried individuals will have constant access to their tax affairs.”
Recommended Next Read
Diversity, Equity, Inclusion: Less talk. More action.
Subscribe to the Sage Advice enewsletter
Get a roundup of our best business advice in your inbox every month.
Ask the author a question or share your advice