Budget Speech 2017
In a budget that can be summarised as revolving around taking from the rich to give to the poor in order to give effect to a more inclusive shared economy, the Minister of Finance, Pravin Gordhan, has left South African consumers with little room to manoeuvre.
While some tax relief has been granted to low and middle income earners, all income earners will experience the impact of increases in the fuel price and excise duties. Leaving them with less money to save and to settle outstanding debt, they will have to review their budgets to provide for these tax increases. Financial planning will play a critical role as consumers will have to budget carefully to ensure they live within their means.
For low income earners there is some relief in the tax threshold being increased to R75 750 per year.
Middle income earners will experience tax relief from the ceiling for property transfer duties being increased to R900 000, relief on university fees (for those earning less than R600 000) and the allowance on tax-free savings accounts increasing from R30 000 to R33 000 per year.
High-income earners will bear the brunt of a larger than expected shortfall (R30 billion) in last year’s tax receipts with an increase in the top marginal tax rate from 41% to 45%. Individuals in this income category who earn an income from dividends on shares will also feel the impact of the withholding tax on dividends being increased from 15% to 20%. This will result in these individuals effectively being taxed at a rate of 33%.
Income earners across all categories will experience the impact of a 39 cents per litre increase in the fuel price. Those who smoke and drink alcohol will pay between 6% and 10% more on excise duties. These increases will in turn have an impact on inflation, with most prices set to increase as a result of higher fuel and excise duties.
A thorough financial planning discussion with a financial adviser will enable individuals to review their budgets and spending and advise them on saving initiatives that will assist them in mitigating the impact of the Budget. A financial adviser is also well-positioned to advise consumers on structuring an investment portfolio to maximise returns in the new tax year.
For more information on how Budget 2017 will impact wealth and investments, please see the attached opinion piece from Momentum’s Macro Research Desk.
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