Budget Speech 2018: What you need to know

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26Feb2018

Budget Speech 2018: What you need to know

  • By Indwe Risk Services
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A Wealthsmith™ knows the importance of running a successful budget – one that considers all incomes and expenses – whether it’s for a household, a business or the South African economy. We tuned in for the 2018 Budget Speech to bring you all the highlights and to help you prepare for the year ahead.

 

VAT increase

 

For the first time since 1993, South Africa’s value-added tax (VAT) has been raised – by one percentage point to 15% from 1 April 2018. This change will play a pivotal role in generating an additional R36 billion for the national purse. Government trusts that 80% of the effect of the hike in the VAT rate will be carried by higher income earners. You can expect to see a further rise in the prices of consumer goods.

 

Income tax

 

There was no relief for tax payers, with the top four tax brackets remaining unchanged. If you want to see the impact of tax on your income, use a tax calculator to work out your annual and monthly income tax deductions according to your age and monthly salary.

 

Medical tax credits

 

The budget also cut back on medical aid related tax breaks, with below inflation increases in medical tax credits. Therefore, if you have a private medical aid, you will be paying more for it in 2018. Money saved here will be put towards funding the National Health Insurance project which hopes to kick off this year.

 

Estate duty

 

Another new tax proposal is the higher estate duty tax rate of 25% for estates greater than R30 million – a hefty amount if you’re part of the super-rich.

 

Fuel tax

 

Motorists will now get fewer kilometres for the same cost, as fuel levies are rising by 52 cents per litre. This is made up of a 22 cents per litre for the general fuel levy and a 30 cents per litre increase in the Road Accident Fund Levy from 4 April 2018. Now more than ever, it will pay to invest in a more fuel-efficient vehicle or to see where you can cut down on or share commuting costs.

 

Sin tax and luxury goods

 

Guilty pleasures, the so-called sin tax, have been singled out once again for a price hike to raise revenue of R2.6 billion.

 

For smokers, the following increases have been put in place:

 

  • 22 more for a pack of 20 cigarettes
  • 38 cents more for 25 grams of pipe tobacco
  • 45 more for 23 grams for cigars

For alcohol, the budget announced these charges:

 

  • A 750 ml bottle of wine will cost 22.5 cents more
  • A 340 ml can of beer will cost 14.66 cents more
  • Cider will cost 14 cents more per 340ml
  • Spirits will be R4.80 more per 750ml bottle
  • Fortified wine will be 27.75 cents more per 750ml bottle

 

Tax on luxury goods

 

The ad valorem excise duties for luxury goods such as motor vehicles will be increased from 7% to 9%.

 

Sugar tax

 

Here’s another reason to try cut down on sugar: treasury has just added an extra sin to the list, with the announcement of sugar tax – to be imposed from 1 April 2018. Called the “Health Promotion Levy”, it will tax sugary drinks in an effort to encourage healthier choices among South Africans. South Africans will be paying more for sugary drinks from April 1 this year, specifically a tax of 2.1c per gram of sugar per 100ml, above 4 grams per 100ml.

 

Carbon tax

 

The state has increased the plastic bag levy by 50% to 12c per bag to reduce littering, with effect 1 April 2018.

 

Funding fee-free education

 

Higher education has been a big talking point in recent months and duly got attention at the 2018 budget speech. It was decided that new first-year students with family incomes of below R350 000 per year at universities and TVET colleges will be funded for the full cost of their study in the 2018 academic year. The first phase of the government’s fee-free higher education plan amounts to R57 billion over the next three years, of which R12.4 billion will go towards needy first-year students in 2018/19. Specifically, more than 340 000 students at universities and over 420 000 full-time equivalent students at TVET colleges will be funded through this new bursary scheme in 2018.

 

Feeling the budget squeeze?

 

You may be tempted to go into more debt or cut down on savings to continue your standard of living, however, you should never skimp on investing in your future.

 

If you have any questions about how the budget impacts your finances and your investments, speak to your Indwe BlueStar adviser on 011 831 8000.

 

Indwe BlueStar is an authorised Financial Services Provider. FSP 2759

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