Finance Minister, Enoch Godongwana delivered his first Budget Speech on Wednesday 23 February 2022.

The corporate income tax rate was reduced from 28% to 27%. (Financial year-end dependant at this point).

Personal income tax brackets have been adjusted and have brought some welcome relief and for the first time since 1990 there was no hike in the fuel or Road Accident Fund levy.

Personal income tax brackets and rebates saw a reduction of about 4.5%, compared to the 5% announced during the 2021 Budget. Income tax now starts becoming payable from taxable income of R 91 259 per annum or R 7 679 per month.

Medical Tax Credits surprisingly enjoyed a welcome change with an increase of around 4.5%.

Employers and Payroll Managers need to exercise caution when processing payrolls to ensure compliance with the 2022 Budget.

Here is our summary of the 2022 Budget and some highlights:

Some general highlights

• Government expects to achieve a primary surplus i.e.:
  • where their revenue exceeds expenditure (i.e. non-interest expenditure);
  • this is expected during the 2023 / 2024 year;
  • in 2024/2025, main budget non-interest expenditure will grow slightly above inflation (i.e. CPI).
• The consolidated budget deficit is projected to narrow – from 6% of GDP in 2022/2023 to 4.2% of GDP in 2024 / 2025.
• The total debt relating to loans will stabilise at 75.1% of GDP in 2024/2025.
• Debt servicing costs consume a huge amount of GDP and revenue. It is envisaged that they will average out at R333.4 billion a year.
• Consolidated government spending will amount to R6.62 trillion over the next 3 years.
• The social wage will take up 59.4% of total non-interest spending over this period.
• Further allocations of R110.8 billion in 2022/2023 have been committed to:
  • R60 billion in 2023/2024, and;
  • R56.6 billion in 2024/2025 are made for several priorities that could not be funded through reprioritisation.
  • These include the special social relief of distress grant (i.e. COVID-19), the continuation of bursaries for students benefiting from the National Student Financial Aid Scheme, and the ever-popular presidential employment initiative.
• The bulk of the spending is allocated to:
  • learning and culture gets R 1.3 trillion;
  • social development gets R 1 trillion;
  • debt-service costs get R 1 trillion over the MTEF.

Tax Proposals

• Tax revenue strengthened significantly this past year and is expected to reach R 1.55 trillion for 2021/2022. This is above projections.
• Government proposes:
  • R 5.2 billion in tax relief to help support the economic recovery;
  • to provide some respite from fuel tax increases (e.g. no increase in the RAF);
  • boost incentives for youth employment by extending the Employment Tax Incentive scheme.
• Most of the relief is provided through an adjustment in personal income tax brackets and rebates in line with inflation.
• No increase in the general fuel levy as well as the Road Accident Fund levy.

Impact on Payroll

• Tax brackets adjusted – inflationary increase.
• Medical tax credits increased.
• Tax rebates and tax thresholds increased.
• Employment tax incentive. To encourage businesses to employ young people, government proposes an increase of 50% in the value of the employment tax incentive, effective from 1 March 2022. The incentive will increase from a maximum of R 1 000 to a maximum of R 1 500 per month in the first 12 months, and from R 500 to a maximum of R 750 in the second 12 months of eligibility.

Tax Tables – 2022 /2023 

Rebates

Thresholds

Medical Tax Credits

Subsistence Allowance

Where the accommodation to which that allowance or advance relates is in the Republic and that allowance or advance is paid or granted to cover:

• Incidental costs only, an amount equal to R 152 per day; or
• The cost of meals and incidental costs, an amount equal to R 493 per day; or
• Where the accommodation to which that allowance or advance relates, is outside of the Republic, and that allowance or advance is paid or granted to cover the cost of meals and incidental costs, an amount per day determined in accordance with the ‘Table: Daily Amount for Travel Outside the Republic’ under Notice 268 published in Government Gazette No. 42258 dated 1 March 2019.

Travelling Allowance

The actual distance travelled during a tax year, and the distance travelled for business purposes substantiated by a logbook, are used to determine the costs which may be claimed against a travelling allowance.

Rates per km,  which may be used in determining the allowable deduction for business travel against an allowance or advance where actual costs are not claimed, are determined using the table published on the SARS website.  

Note:

• There hasn’t been a published change in the Prescribed Rate or the Travel Table – this may follow in the coming weeks.
• 80% of the travelling allowance must be included in the employee’s remuneration for the purposes of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.
• No fuel cost may be claimed if the employee has not borne the full cost of fuel used in the vehicle, and no maintenance cost may be claimed if the employee has not borne the full cost of maintaining the vehicle (e.g. if the vehicle is covered by a maintenance plan).
• The fixed cost must be reduced on a pro-rata basis if the vehicle is used for business purposes for less than a full year.

Retirement Fund Lump Sum withdrawal benefits

Retirement Fund Lump Sum benefits or severance benefits

Trusts other than special trusts

The tax rate remains at 45%.

Corporate Tax Rate

Companies with their financial year ending during the period 1 April 2022 and 30 March 2023 will be taxed at a rate of 28%, and companies with their financial year ending during any date on or after 31 March 2023 will be taxed at a rate of 27%.

SARS Update

• SARS has significantly boosted its capability from a skills and technology perspective.
• They have greatly intensified their use of third party data to establish levels of compliance/disclosure.
• They will be focusing more attention on those that earn in excess of R 1 700 000 p/a.
• High Net Worth Individuals are again in the spotlight with many audits being planned for the upcoming year. 
• The SARS strategy to obtain more data, more regularly from employers is still on track and will intensify over the coming months.

In summary, Finance Minister Enoch Godongwana’s first Budget Speech delivered some good news in areas and some welcome surprises.

Join us at our Payroll Managers Tax Year-End Seminar where we will uncover the 2022 Budget Speech in detail. Book your seat here.