With the end of the year drawing near, most South African businesses shut their doors for the festive season and give their employees some well-deserved time off. Much time is spent reflecting over the year that has passed and we dwell on the good times and the bad, but how many of us actually start looking ahead and planning for the New Year?
2 March 2015
The Budget Speech, delivered on 25 February 2015, introduced many significant changes placing further financial burden on cash strapped consumers. Make sure you are aware of these changes, so that you are financially prepared. Keep reading to find out how the 2015 Budget Speech will affect you!
Things which will BUST YOUR BUDGET:
1. Personal Income Tax Rises
The budget speech introduced changes which will impact consumer’s salaries. Income Tax has been increased by 1%, meaning if you are a tax payer earning over R200 000 per annum, you will be taxed more on your salary, leaving you with less money to take home.
2. Increase in Fuel Costs
Fuel prices are going up. From 1 April 2015, you will pay up to 80.5c per litre in fuel levies. This means you will pay R2.55 per litre of petrol and to R2.40 per litre of diesel in fuel levies. In addition, oil prices have increased by 20% off their lows, which means petrol will further increase in cost. Be aware of these predicted tax hikes and make room for additional costs in your budget.
3. Booze and Tobacco Tax Increase
Both smokers and drinkers are deemed to pay more for their vices, as the cost of beer, sparkling wine, spirits and cigarettes increase.
Taxes are going up and predicted VAT increases are also on the horizon. Before you know it, your disposable income will deplete on a monthly basis leaving you with less. Make provisions in your budget for these extra expenses.
Although these outcomes will bust your budget, there is still hope…
Things which will BENEFIT YOUR BUDGET:
4. Tax Incentivised Savings Plan
In order to develop a culture of saving, tax-free savings accounts (TFSA’s) allowing you to invest up to R30, 000 a year tax-free and a maximum of R500 000 over your life-time, will become at available at banks.
5. Government Pension Funds
From April 2015, The Government Employees Pension Fund (GEPF), the Associated Institutions Pension Fund and the Temporary Employees Pension Fund and recipients of special and military pensions will receive a 5.8% pension increase. If you are in the public sector, you will be able to maximise on the long-term benefits of these pension funds.
6. Home Loans – Transfer Duty Relief
Now might not be a good time to take out a home loan. Transfer duties will be eliminated for properties below R750 000, while the rate on properties above R2.25 million will increase. For many first time home owners, this may be a good time to invest.
7. Small Business Owners Benefit
Starting a business is never easy and most business fail within the first year. Owners are then settled with major debt problems after the business closes. The government will bolster the Small Business Development Department by providing a cash injection of R20m. All small businesses with a qualifying turnover of less than R335 000 a year will pay no tax and the maximum rate of tax will be dropped to 3%. This will provide the department with more resources to small businesses and create confidence in budding entrepreneurs.
Although the budget speech may not bode well for all consumers, it is definitely a call for all consumers to make financial health a priority. The way government finances are managed should not be different from personal consumer budgeting. Government gets revenue from tax payers and individuals get their income from salaries. When the economy grows individuals income goes up and so does government revenues. The important thing to remember is that everyone needs to budget, budget, BUDGET!
Author: Zandile Ramalohlanye (DebtBusters Financial Consultant).