How SA’s New Budget Affects You
Budget Insurance gives you the lowdown on Budget 2018, tabled in parliament this week.
The big news from Budget 2018 is an increase in VAT. VAT is currently 14% and will increase to 15% on 1 April 2018. 19 basic food items such as brown bread, rice and maize are zero-rated. This is the first VAT increase since 1993.
You’ll also be paying more for wine, beer and tobacco, petrol, but there’s a bit of tax relief for low-income earners, with an increase in the tax threshold. These are some of the changes you can expect when Budget 2018 comes into effect on 1 March.
Budget 2018 is known as an austerity budget. In a nutshell, the country has been spending more than it earns so we have to tighten our belt, and pay a bit more in tax.
Five things that will cost more:
- Alcohol and tobacco
Taxes, known as excise duties, on the not so healthy items in our baskets increase from 1 March 2018. A pack of 20 cigarettes will cost R1.22 more and 25g of pipe tobacco will cost 38 cents more. Wine lovers will pay 30 cents more for a 1 litre bottle, and when you’re celebrating with a bottle of sparking wine you’ll need an extra 97 cents. Spirit drinkers will pay R4.80 more for a 750ml bottle of their favourite tipple. Beer and cider drinkers need deeper pockets too. 340ml cans of malt beer and cider increase by 14 cents.
- Sugary beverages
Sugary drinks will be taxed if they contain more than 4g of sugar per 100ml. You can find the sugar content on the drink’s nutrition label. A 340ml can of a well-known soda contains 10g of sugar per 100ml. For every gram over the 4g limit, an extra 2.1c is levied. Your can that cost R10 will cost R10.12 from 1 April 2018.
- Petrol and diesel
On 4 April the price of petrol will increase by 52 cents a litre. 30 cents of this is for the road accident fund levy and 22 cents for the general fuel levy.
- Plastic bags and incandescent light bulbs
The plastic bag levy increases to 12 cents a bag on 1 April, and there’s an increase from R6 to R8 on incandescent light bulbs. Switching to energy efficient light bulbs will save you some money.
- Luxury goods such as electronics, cosmetics, smart phones and golf balls
These goods incur tax of between 5 and 7%, this will increase to 7 – 9%.
- Higher income earners will pay more tax
If you earn less than R78 150 and are under 65 years you won’t pay any income tax. This is known as the tax threshold. Over 65s don’t pay tax if their income is lower than R121 000 and over 75s, R135 300.
Below inflation increases in tax apply to lower income earners. You can work out your tax using the table below or work out your tax from the tax tables in the people’s budget.
|Taxable income in rands||Tax payable 2018/19|
|R0 – R195 850||18% of each R1|
|R195 851 – R305 850||R35 253 + 26% of the amount above R195 850|
|R305 851 – R423 300||R63 853 + 31% of the amount above R305 850|
|R423 301 – R555 600||R100 263 + 36% of the amount above R423 300|
|R555 601 to R708 310||R147 891 + 39% of the amount above R555 600|
|R 708 311 to 1 500 000||R207 448 + 41% of the amount above R708 310|
|R1 500 001||R532 041 + 45% of the amount above R1 500 000|
Remember that every taxpayer qualifies for a rebate, which you can deduct from your tax payable. The primary rebate increased to R14 067, the secondary rebate to R7 713 and the tertiary rebate to R2 574.
Where does your tax money go?
We spend around two thirds (62%) of our budget on social rights such as education and health. This coming year, R351,1 billion will be spent on learning and culture alone, that’s 21% of our total expenditure. R200,8 billion goes to protection services such as the police and defence force and R200,1 billion goes to growing our economy.
The bad budget news is that most of us will pay more tax. But it’s not all negative, a number of allowances, grants and incentives have increased.
- Medical tax credits
If you belong to a medical aid you qualify for medical tax credits that reduce your tax. These increase from R303 for the principal member and first dependant (you and your spouse for example) and R204 for additional dependants per month to R310 and R209 a month. Remember to include this on your tax return.
- Old age pension and other grant increases
The old age grant for over 65’s increases to R1 695 and R1 715 for the over 75s. The child support grant increases to R405 a month, and the foster care grant to R960. The disability grant increases to R1 695 a month
- Running your own business?
The company tax rate of 28% is unchanged. A R2.1 billion rand fund is being set up to benefit small and medium enterprises in the start-up phase. This fund will be managed by the Department of Small Business Development.
- Free higher education
Free higher education for qualifying households was announced by former president Jacob Zuma at the end of last year. R57 billion is allocated to this in this year’s budget. All new first year students at universities and TVET colleges will qualify for funding the full cost of their studies if the family income is less than R350 000. The programme will be phased in so second year students are covered in 2019, and third year students in 2020.
With the upcoming increases, Budget Insurance has compiled a guide to smart money management:
- To draw up a budget, start with a list of fixed expenditures and other monthly deductions. Have a careful look at what you are spending your money on and identify where you might be “leaking” cash on non-essentials like take-aways, entertainment and satellite TV, as well as on essentials such as your cellphone, groceries and transport. Once you have pinpointed areas where you could be spending less, start cutting back.
- Remember, even the smallest adjustments can make a meaningful difference over the long term. Channel the extra money you have into paying off your debt faster, starting with those with the highest interest rates first. As your debt repayments start getting smaller, you will have more and more money to allocate to your personal savings and other more worthwhile causes – such as saving for retirement planning, a deposit on a new house or a holiday.
- Set a savings goal for yourself and consider saving as a non-negotiable, essential ‘expense’ on your monthly budget. Whether your goal is to put away R250 or R1000 a month, put it in your budget and stick to it.
- Be honest about your debt obligations and your expenses so that you have a clear and realistic picture of your true monthly spend.
- Get creative when looking for ways to cut back on costs. For instance, you could establish lift-clubs to save money on petrol and encourage your family to switch off lights in unoccupied rooms to save on electricity costs.
- Put away your credit cards. Don’t carry them around in your purse or wallet as you might be tempted to spend. Rather carry a debit card for everyday purchases and save-up for the more expensive things you want.
- Use your smart-phone, smartly – when you’re creating a budget, there are many free apps that make budgeting easy including: 22seven, MyFinancialLife, Sage Pastel My Money, Spending Tracker and Money Mammals® Save for a Goal.
November 2018The November 2018 edition of Get It Lowveld is online now!