All eyes and ears will be on Finance Minister Tito Mboweni when he delivers his maiden budget speech in parliament on Wednesday.
Product specialist at FNB wealth and investment Ester Ochse told Zululand Observer: “Pressure has undoubtedly been on the South African Treasury to take active steps to address financial shortcomings and enable local and global growth within the local economy,”
But the question is, how will it affect consumers, business growth, and investments?
Ochse unpacks a few areas that can affect consumers:
Personal income tax
Simply defined, income tax is a government tax imposed on businesses and individuals who generate an income.
Income tax is levied on income such as salaries, investments and rental income, annuities, pension income, to mention a few.
Taxpayers are liable to pay income tax if they earn more than R78,150 and if younger than 65 years.
If over 65 years of age or older, the tax threshold (i.e. the amount above which income tax becomes payable) increases to R121,000. For taxpayers aged 75 years and older, this threshold is R135,300.
Taxes can sometimes cause significant pressure on taxpayers.
“We encourage taxpayers to manage their existing budget and ensure that one’s debt to income ratio is minimised at all costs,” says Ochse.
President Ramaphosa alluded to improving the education system in the 2019 State of the Nation Address.
Saving for your child’s education should be a priority on a regular basis. With the increasing cost of education, parents are encouraged to continue making provisions monthly for their children’s future.
Sin tax is tax on tobacco and alcoholic products.
Each year, the sin tax tends to increase between 6% and 10%, which can cause a bit of a hole in your pocket.
Tobacco and alcoholic products can become costly.
“We advise consumers to allocate these extra costs in their monthly budgets and reduce consumption, which would ease expenses and keep consumers healthy,” Ochse says.
Tax-free savings accounts
The annual tax-free savings limit is R33,000 per year and a lifetime maximum of R500,000.
A tax-free savings account is a long-term investment vehicle which can benefit you or your child from re-invested and compound interest over many years.
The key is to invest in assets that earn real annual returns that beat inflation.
The key to investing is to invest early, stay invested and in time you will reap the rewards, regardless of how much you invest per month.
Last year, the general fuel levy increased by 22 cents per litre and the road accident fund levy increased by 30 cents.
With the increase in fuel costs, consumers should look at carpooling or even using public transport. This will help ease the burden on one’s finances.
Last year, and for only the second time since its introduction, Value-Added Tax (VAT) was raised by a one percentage point to 15% as part of the 2018 budget speech by former finance minister Malusi Gigaba. VAT is an indirect tax on the consumption of goods and services in the economy.
“The budget speech should be an indicator of how we should better manage our finances.
“It should not be ignored as many of the changes affect you and your lifestyle. By ensuring that you understand what the budget speech means, you will be able to plan appropriately in the future,” says Ochse.
Gugu Myeni / The Citizen