South Africa’s Minister of Finance, Enoch Godongwana, delivered his 2022 budget speech in February, which analysts have since described as “feel-good.” Not only did he extend a hand to foreign investors in an attempt to get our country’s economy up and running again, but he also gave South Africans a few reasons to smile! Take a look at some of the key takeouts of the 2022 Budget Speech below.
Personal Income Tax Relief
Tax brackets and rebates have increased by 4.5%, which is in line with inflation. Godongwana noted that the government wants to spare already overburdened taxpayers any further increases here. Instead of increasing the top tax rates, it would be beneficial to broaden the tax base.
Corporate Income Tax Reduction
As announced in 2021, the corporate tax rates will fall to 27% from 01 April 2022. The government is hoping that South Africa will become more attractive to foreign investors by doing this. Big businesses will also be receiving some reprieve here as corporate tax rates are being reduced by one percentage point.
Increase in Employment Tax Incentive Threshold
As of 01 March 2022, the Employment Tax Incentive (ETI) threshold will increase to R1500 (from R1000) for the first 12 months of employment and to R750 (from R500) in the second 12 months. The ETI reduces the employer’s overall Pay-As-You-Earn (PAYE) contribution without actually impacting individual employee wages. This will indirectly support job creation in the country by encouraging businesses to employ more young people.
This applies to all your employees who:
- Are between 18 and 29 years old
- Have a valid South African ID
- Earn a monthly salary between R2000 and R6500
Increase in Medical Tax Credits
The medical tax credits will increase from R332 to R347 per month for the first two members and from R224 to R234 per month for each additional member.
Adjustments to Tax-Free Threshold
The annual income level at which people under the age of 65 will start paying tax has been raised from R87 300 to R91 250. Here’s a closer look at this:
- If you are under the age of 65, your yearly tax threshold is R91 250 (previously R87 300)
- If you are between 65 and 75, your threshold is R141 250 (previously R135 150)
- If you are 75 or older, your threshold is R157 900 (previously R151 100)
We also noted that VAT remained unchanged at 15%.
“The President reminded us that even as we face steep and daunting challenges like we have done in the past, we will overcome. To do so, we need to strike a critical balance between saving lives and livelihoods, while supporting inclusive growth. This budget presents this balance.” – Minister of Finance, Enoch Godongwana
Need a little help with your business’s budget?
Find out how the 2022 changes can benefit you and your business, and let the experts take a look at your budget for this year and make sure you’re on the right track. Get in touch today, and let’s chat! https://financestudio.co.za
