The 2020 budget speech has been delivered without any surprises that many consumers and market watchers were bracing for. Major themes included cutting spending, the expected focus on individual and corporate taxes, while outlining the spending and growth forecasts for the next one to three years.
Depending on the view from your side of the fence, this year's budget will have both positive and negative outcomes.
Relief for hardworking taxpayers
The biggest surprise is the personal income tax relief announced by the minister. The above-inflation increases in the income tax brackets provides welcome relief to many consumers. This relief, in conjunction with lower inflation and the recently announced reduction in interest rates, will make it easier for consumers to manage their already pressured personal budgets.
Helping businesses to grow
It is encouraging to see that the budget has highlighted and supported some of the constraints facing small businesses in the country. A preferential small business tax regime, a lowering of the VAT registration threshold as well as turnover tax will bring some relief to a sector that not only plays a vital role in our economy but also unlocks job creation.
We do however still feel that the existing red tape facing many new business entrants into the market can still be reduced to support businesses in the start-up phase and allow for greater access to funding. We welcome the focus that the budget has brought to streamline the registration of new businesses with the CIPC, SARS, the UIF and the compensation fund.
Boosting agriculture exports
We are encouraged by the focus on agriculture given that the sector is a major employer in the economy. Biosecurity is necessary to prove to our trading partners that South African agricultural production and processing meets international health protocols. Once these standards are met and certified, it is possible to establish trade protocols for agricultural products and expand opportunities for export or entering new markets.
The R495 million allocated to improve biosecurity and support exports will have a multiplier effect on the amount of exports that will flow from an effective spend of the budgeted amount. This improves both employment and the balance of payments position while providing impetus for growth in the sector.
Widening access to property
Transfer duties on R1 million or less will go a long way to supporting first-time home buyers as well as those purchasing properties in the affordable end of the market. Already, this is a sector where we are seeing a lot of demand but with constraints on the supply side. It is our hope that this new stimulus into the affordable end of the market will start bringing supply-side relief into the critical sector of the economy and allow for more South Africans to benefit financially from tangible asset ownership.
Increasing the tax-free contribution limit
The annual tax-free saving contribution limit increased from R33 000 to R36 000 but the lifetime savings limit was not adjusted and remains at R500 000. This move increases the attractiveness of the tax benefit on tax-free investments for individuals. We are confident that this will encourage more individuals to utilise tax-free investments as a long-term saving vehicle. However, a move by government to increase the R500 000 lifetime limit would also have been a welcomed measure.
Upping medical credits
Another welcome move is the increase in medical credits. In the 2018 Budget Review government chose not to increase medical credits with the purpose of accruing funding for the future rollout of the National Health Insurance. However, this year taxpayers were fortunate that there was an increase in these credits albeit lower than inflation.
With the hard work of the budget now complete, professionals, commentators, businesses and households will reflect on the impact that this year's budget will have on them. It is important that as consumers we understand what these impacts are and how we can plan or even benefit from them going forward.