Budget Speech Update 2023

The 2023 Budget speech was delivered against the backdrop of high living costs, unemployment rate and intensive loadshedding. All of which are placing severe strain on South Africa’s economic recovery and growth. Finance Minister Enoch Godongwana was closely watched when he delivered his budget speech as he attempted to strike a balance between spending priorities and the limited resources available to the National Treasury. One of the main topics that have been discussed is how the government planned to overcome the energy crisis in South Africa.
 
What were the highlights?
 
The key take-outs from this year’s Budget are summarised below:

• The personal income tax brackets and rebates have been adjusted in line with the expected inflation rate of 4.9%.
• An upward adjustment of 10% has been made to the tax brackets for retirement fund lump sum benefits (both before and at retirement) and transfer duties. The applicable tax rates remain unchanged.
• The government has announced two tax measures to encourage businesses and individuals to invest in renewable energy and increase electricity generation. From 1 March 2023, businesses will be able to reduce their taxable income by 125% of the cost of an investment in renewables and there will be no thresholds on the size of the projects.
• Individuals who install rooftop solar panels will be entitled to a tax rebate of 25% of the cost of the panels, up to a maximum of R15 000, to promote additional electricity generation. This incentive will only be available for one year and is not available for inverters or batteries.
• No changes have been made to the general fuel levy or the Road Accident Fund levy to reduce pressure on households and businesses.
• Excise duties on alcohol and tobacco (known as sin taxes) will increase by 4.9% in line with expected inflation.
• The diesel fuel levy refund will be extended to food manufacturers for a period of two years, from 1 April 2023 to 31 March 2025, to limit the impact of power cuts on food prices.

 
Rebates
The primary, secondary and tertiary rebates (deductible from tax payable) will increase to the following:

• R17 235 per year for all individuals
• R9 444 for taxpayers age 65 and over
• R3 145 for taxpayers age 75 and over

 
Medical tax credits
Monthly tax credits for medical scheme contributions will increase to the following:

• R364 per month per beneficiary for the first two beneficiaries
• R246 per month for each additional beneficiary

 
Companies
Reminder: Corporate tax rate reduction
•In the 2022 Budget speech, it was announced that the corporate tax rate would be decreasing from 28% to 27%, effective for years of assessment ending on or after 31 March 2023.

Capital gains tax (CGT)

The CGT inclusion rate for individuals and special trusts remains at 40%, and for other taxpayers at 80%.

The annual exclusion for a capital gain or loss granted to individuals and special trusts remains at R40 000. The exclusion granted to individuals remains R300 000 in the year of death.

The following applies for the period from 1 March 2023 to 29 February 2024, unless otherwise stated:

Individuals and special trusts

Personal income tax brackets will be fully adjusted for inflation for the 2023/2024 tax year. The highest marginal tax rate for individual taxpayers remains unchanged at 45%. The personal income tax rates for the 2023/2024 tax year are listed below.

Tax thresholds

The tax-free thresholds for personal income taxes will also be adjusted for inflation for the 2023/2024 tax year to the following:

• R95 750 for taxpayers younger than 65
• R148 217 for taxpayers age 65 to 74
• R165 689 for taxpayers age 75 and over

Trusts

The income tax rate for trusts (other than special trusts) remains unchanged at 45%.

Interest exemptions

The local interest exemptions remain unchanged:

• The exemption on interest earned for individuals younger than 65 years remains R23 800 per annum.
• The exemption for individuals 65 years and older remains R34 500 per annum.

Foreign interest remains fully taxable.

Dividends tax remains at 20% on dividends paid by resident and non-resident companies for shares listed on the JSE.

Foreign dividends received by individuals from foreign companies (shareholding of less than 10% in the foreign company) are taxable at a maximum effective rate of 20%.

Interest withholding tax remains at 15% on interest from a South African source payable to non-residents. Interest is exempt if payable by any sphere of the South African government, if payable by a bank or if the debt is listed on a recognised exchange.

Tax-free savings account

The annual cap on contributions to tax-free savings accounts remains at R36 000 from 1 March 2023, with the lifetime limit also remaining at R500 000.

Retirement lump sum taxation

At retirement, the first R550 000 of a retirement lump sum will be tax-free. The table below illustrates how retirement lump sums will be taxed:

Source: Justin Evans

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