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Budget 2018 – What You Need to Know

On Wednesday, the Minister of Finance, Malusi Gigaba delivered the much-anticipated and hotly debated Budget Speech for 2018.

While most of us were stuck at work, unable to listen to what the Minister had to say, there were some very important announcements that could change the way we do business and handle our finances.

Here are some of the most important points, curated by MoneyPenny.

The increase in VAT

One of the most prominent announcements was the increase in VAT from 14% to 15%. This will be the first increase in VAT since 1993 and will allow government to raise an estimated R36 Billion in the next financial year. R23 billion will be used to cover current government debt.

It remains to be seen what impact this will have on poor households. The government have retained their zero-rated VAT on basic items such as maize meal, brown bread and rice.

No Wealth Tax

There’s been a lot of talk surrounding the introduction of a wealth tax that will see wealthy people having to pay an annual tax on the sum of their assets.

This has not yet been introduced but there was an increase in the ad-valorem excise duty rate on luxury goods from 7% to 9%.

Estate duty also saw an increase from 20% to 25% for estates of R30 million or more.

Higher Fuel Levies

The fuel levy will increase by 22 cents per litre while the Road Accident Fund levy will increase by 30 cents a litre.

This means that no matter what mode of transport you use, you will end up paying more to get from one point to another.

This will certainly have a negative impact on the poor and could lead to changing in the way that we commute.

Free Education

After Jacob Zuma’s bombshell announcement that the government will provide free education to the poor, R57 billion has been set aside to make this happen over the course of the next three years.

First year students with a family income of less than R350 000 per annum at universities and TVET colleges will be funded for the full cost of study.” 

While the exact impact of these fiscal changes remains to be seen, we urge everyone to be very wary of their spending habits and encourage you to ensure that your tax affairs are in order.

For assistance with any accounting and tax related issues, please do not hesitate to contact us.

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2018 Budget Speech: What Can We Expect?

On a political front, it has been a very exciting start to 2018. Regardless of where your allegiances lie, it is safe to say that most South Africans are much more positive about our country’s political future than we have been for many years.

The Rand has responded very well among all the changes that 2018 has brought – alleged corrupt officials have been arrested, we’ve seen the back of Jacob Zuma and President Cyril Ramaphosa has impressed with his inaugural State of the Nation Speech.

Next up, we have the Hon. Malusi Gigaba who will deliver the 2018 Budget Speech on Wednesday 21 February.

With a budget shortfall of around R50.8bn, you’d expect the Minister of Finance to be focussed on the job at hand instead of playing Candy Crush during SONA 2018; nonetheless, as another debutant with regards to budget speeches, Gigaba has his work cut out for him.

The main aim for the 2018 Budget Speech will be to close the massive budget deficit. Corrective intervention is needed to improve South Africa’s fiscal outlook and will most likely come in the form of increased taxes on cigarettes, alcohol and fuel.

Further tax hikes could be seen in the form of additional progressive tax, concentrated on higher income groups.

Another important factor will be to restore investment confidence in our markets – Gigaba would have to implement measures to stabilise the debt trajectory to satisfy any reviews from Moody’s and co that are likely to follow.

Another option at Gigaba’s disposal is to raise the VAT rate, currently at 14%. With rampant poverty and unemployment across the country, this is something that would hit the poor the hardest. To limit the effect of an increase in VAT to the poor, we might even see a tiered VAT increase – this will see an increase in VAT on luxury items.

Whether South Africa can avoid another ratings downgrade remains to be seen – we think it might be avoided by a whisker but there’s certainly a lot of work to be done to restore investor confidence.

Above all of this, the Minister would also need to find funding for the proposed free tertiary education program – this is an unenviable task that could make or break the success of the 2018 Budget Speech.

At MoneyPenny, we can only advise that in uncertain financial times, every business and individual maximise the amount of money that can be saved every month and should focus on getting their tax affairs in order while working according to a strict financial plan.

If you would like any assistance with your financials and tax, please do not hesitate to contact us.

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IMPORTANT NEWS: COIDA Threshold Increase 2018/2019

The Hon. Minister of Labour, NM Oliphant, announced on 13 December 2017 in a Government Gazette (41382) that she intends to increase the amount of earnings under Section 83 (8) of the Compensation for Occupational Injuries and Diseases Act, 1993 (Act no. 130 of 1993).

The Hon. Minister has increased the maximum amount of earnings from R403 500 to R430 944 per annum with effect from 01 March 2018.

Click here to download the Government Gazette Notice.

This COID act provides for compensation for disability in the event of occupational injuries or diseases contracted at work, or death resulting from these injuries or diseases.

In the same gazette, she announced the way in which compensation, including the nature and degree of disablement is calculated, the nature of benefits and the recommended minimum and maximum compensation, which comes into effect 1st April 2018.

There is also a 5.8% increase in monthly pensions payable, from the same date.

Should you have any further questions, please do not hesitate to contact us.

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As 2018 kicks off in full swing, it’s time to plot and plan our way around the various SARS submission deadlines.

The first such deadline is the annual submission for EMP501 – during the Employer Reconciliation process, employers are required to submit an EMP501 declaration which reconciles the taxes collected from employees with the monies paid to SARS, and the total tax value of employees’ income tax certificates for the respective period.

The Income Tax Act No.58 of 1962 states inter alia that employers are required to:

  • Deduct the correct amount of tax from employees.
  • Pay the amounts over to SARS on a monthly basis.
  • Reconcile these deductions and payments during the annual and interim reconciliation process.
  • Issue tax certificates to employees.

The deadline for the EMP501 submission for 2018 is 01 April 2018 – 31 May 2018. This gives employers 2 months to prepare and submit the EMP501 information to SARS.

While these submissions, and others, can be an admin nightmare, they really don’t have to be. By outsourcing the work to a tax consultant like MoneyPenny, you can rest assured that all tax-related issues are taken care of, allowing you to focus on growing your business.

Effective employee tax management relieves stress, not only on your business, but also on the people who work for you.

Non-compliance with regards to your taxes, will lead to punitive penalties and could ultimately cost your business a lot of money.

By structuring your affairs and transactions optimally, with the help of MoneyPenny, you can end up saving substantial amounts of money in income tax, capital gains tax and estate duties.

To learn more about how we can help you and your business, complete the form on our CONTACT US page and our experienced team of tax advisors will get in touch.

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