The Minister of Finance, Enoch Godongwana delivered his maiden National Budget Speech 2022 on 23rd of February 2022.
The Budget was positive in that it took into account the effects of CoVID-19 and increased fuel prices on households and businesses. We have summarised key aspects for taxpayers and employers below.
Tax proposals for 2022/23
Of relevance to all, in particular to Employers
Personal Income Tax
- The personal income tax brackets and rebates will be adjusted by 4.5 percent, in line with inflation. (tables included)
- The adjustments will mean that the annual tax-free threshold for a person under the age of 65, will increase from R87 300 to R91 250. (tables included)
- Medical tax credits will increase from R332 to R347 per month for the first two members, and from R224 to R234 per month for additional members.
Employment tax incentive
- The employment tax incentive will be expanded through a 50 per cent increase in the maximum monthly value to R1 500.
Corporate Income Tax
- The corporate income tax rate will be reduced from 28 per cent to 27 per cent, for companies with years of assessment ending on or after 31 March 2023.
- The carbon tax rate will increase from R134 to R144, effective from 1 January 2022.
- The carbon fuel levy will increase by 1c to 9c per litre for petrol, and 10c per litre for diesel, from 6 April 2022.
- The first phase of the carbon tax, with substantial allowances and electricity price neutrality, will be extended to 31 December 2025.
Note: A detailed analysis on carbon tax can be found in A Comprehensive Guide to Carbon Tax by Andrew Gilder, Olivia Rumble, Mansoor Parker and Geoff Stiles.
We have included the tax tables below, but a more detailed analysis for tax practitioners can be found in Income Tax Practice Manual.
Of relevance to Consumers
Personal Income Tax
- The personal income tax brackets and rebates will be adjusted by 4.5 percent, in line with inflation. (tables included). The increases in tax brackets are above inflation, effectively decreasing the personal income tax rates.
- The exemption of foreign remuneration earned by South African tax residents remains unchanged.
- Excise duties on alcohol and tobacco will increase by between 4.5 and 6.5 percent.
- Government proposes to introduce a new tax on vaping products of at least R2.90 per millilitre from 1 January 2023.
- A new tax will also be introduced on beer powders.
- The health promotion levy on beverages will be increased to 2.31 cents per gram of sugar.
- For the first time in many years, there will be no increases to the general fuel levy on petrol and diesel for 2022/23. There will also be no increase in the Road Accident Fund levy.
- There is an undertaking to review the fuel levy structure to arrive at a more sustainable future approach to fuel increases.
Plastic bag levy will be increased by 3 cents to 28 cents per bag from 1 April 2022.
Note: Consumers should note that these rates only apply from 1 March 2022 so tax returns for the tax year ending 28 February 2022 are based on the current tax rates as contained in the Professional Tax Handbook and Income Tax Legislation . Guidance on interpreting this legislation is provided in the SA Income Tax Guide compiled by Michael Stein, Keith Engel and Beatrie Gouws.
The following is a summary of the items that require some attention from a payroll perspective.
Income Bands and Tax Tables:
The personal income tax brackets will be adjusted by 4.5 percent, in line with inflation. The top marginal rate of tax remains 45%. It was also 45% in the 2021, 2020, 2019 and 2018 years of assessment. But it was only 41% in the 2017 year of assessment. The level at which the top rate is reached increased to a taxable income of R1 731 601.
2023 tax year (1 March 2022 – 28 February 2023)
|Taxable Income||Rates of Tax|
|R 0 – R 226 000||18% of taxable income|
|R 226 001 – R 353 100||R 40 680 + 26% of taxable income above R 226 000|
|R 353 101 – R 488 700||R 73 726 + 31% of taxable income above R 353 100|
|R 488 701 – R 641 400||R 115 762 + 36% of taxable income above R 488 700|
|R 641 401 – R 817 600||R 170 734 + 39% of taxable income above R 641 400|
|R 817 601 – R 1 731 600||R 239 452 + 41% of taxable income above R 817 600|
|R 1 731 601 and above||R 1 731 601 and above R 614 192 + 45% of taxable income above R 1 731 600|
The new tax rebates applicable for individuals:
- if younger than 65 (primary) – went up to R 16 425
- if older than 65 (secondary) – went up to R 9 000
- if older than 75 (tertiary) – went up to R 2 997
The amount an individual can earn before being required to pay tax for the tax year from 1 March 2022 to 28 February 2023 is adjusted as follows:
- if younger than 65 – the first R91 250 is tax free
- if older than 65 – the first R 141 250 is tax free
- if older than 75 – the first R 157 900 is tax free
Medical Tax Credits
There will be an increase in the value of medical tax credits in 2022/23, rising from R332 to R347 per month for the first two beneficiaries, and from R224 to R234 per month for the remaining beneficiaries.
- There have been no changes to the withdrawal benefits, retirement fund lump sum benefits, death benefits or severance benefits.
- Changes to pension funds regulations and the retirement system have been proposed and will be gazetted.
Capital Gains Tax
No changes for individuals and special trusts or other trusts but for companies the rate dropped from 22.4% to 21.6%
The subsistence allowance for local travel (inside SA) has increased to
- R 152.00 per day (prev. R 139.00) for incidental costs
- R 493.00 per day (prev. R 452.00) for meals and incidental costs
For foreign travel (outside SA) Notice 268 GG 42258 dated 1 March 2019, remains in force until communicated otherwise.
Rates per kilometre, which may be used in determining the allowable deduction for business travel against an allowance or advance where actual costs are not claimed, will be published on the SARS website www.sars.gov.za, under Legal Counsel / Secondary Legislation / Income Tax Notices.
- 80% of the travelling allowance must be included in the employee’s remuneration for the purposes of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.
- No fuel cost may be claimed if the employee has not borne the full cost of fuel used in the vehicle, and no maintenance cost may be claimed if the employee has not borne the full cost of maintaining the vehicle (e.g. if the vehicle is covered by a maintenance plan).
- The fixed cost must be reduced on a pro-rata basis if the vehicle is used for business purposes for less than a full year.
- The actual distance travelled during a tax year, and the distance travelled for business purposes substantiated by a log book, are used to determine the costs which may be claimed against a travelling allowance.
Rate of interest
The ‘official rate of interest’ for the purposes of the determination of the taxable fringe benefit was reduced to 5% with effect from 1 February 2022. An employer would therefore need to reduce the fringe benefit value of employee loans that are interest free or carry interest at less than the official rate from 1 February 2022.
Compiled by LexisNexis