The 2022 national budget - here's how it impacts homeowners
Category Business & Finance
Despite conflicting reactions, Minister Enoch Godongwana's 2022 budget address is being regarded favourably. This is mostly due to a reduction in corporate income tax, revisions in personal income tax levels, and no rise in the fuel or Road Accident Fund levy - for the first time since 1990.
"Households and businesses are still under financial pressure and are coping with higher obligations, the effects of Covid-19 and increased fuel prices. Now is not the time to increase taxes and put the recovery at risk," stated the Minister.
While there have been no direct changes to the property industry, other variables have an impact on your lifestyle and how much money you have left at the end of the month. For example, while there will be no rise in fuel tax in April in South Africa, the escalating cost of petrol will continue to set you back a few hundred Rands in the following months.
On the bright side, a 4.5% adjustment to personal income tax brackets and rebates will provide inflationary relief. For example, if you are under the age of 65 and earn R500 000, your income tax payment will be reduced by around R3 300 per year - or R276 each month to spend towards your household expenses.
First-time buyers
Despite the two rate rises, the housing market remains favourable for buyers, since interest rates remain the lowest in decades. However, because the transfer duty exemption has not been adjusted, the R1 million barrier is sliding behind the entry-level property price, which is now approximately R1.2 million or R750 000 for a modest house. If you are a first-time buyer, the lower interest rate is still in your favour; but, if your home is priced at R1.2 million, you will have to pay 3% of the value above R1 million.
Luxury market
The transaction costs, transfer duty, and Capital Gains Tax are excessive for the luxury market to stimulate bigger sales volumes. Instead of selling, many luxury homeowners are investing in home improvements. When they do purchase, they tend to spend less.
To aid in the discovery of noncompliance or fraud via the presence of unexplained wealth, all provisional taxpayers with assets exceeding R50 million will be obliged to disclose specified assets and liabilities at market value in their 2023 tax returns. This will aid in the detection of fraud and tax evasion by these individuals.
Other prospective tax recommendations include a new personal income tax system for remote working, a review of the exemption of foreign retirement benefits from domestic taxation, and a review of depreciation and investment allowances.
Other increases that would affect your buying power
- 5.5% hikes for wine, beer and cigarettes to 6.5% for spirits and sparkling wine. A new tax will also be introduced on beer powders.
- A new tax on vaping products of at least R2.90 per millilitre will be introduced from 1 January 2023.
- The health promotion levy for beverages with more than 4g of sugar content per 100ml will be increased from 2.21c/g to 2.31c/g.
- Plastic bag levy is increased by 3 cents to 28 cents per bag.
- The incandescent light bulb levy will be increased from R10 to R15 per light bulb.
Bounce-back scheme for small businesses
A new business bounce-back scheme will consist of two parts;
1. Participating banks and development finance institutions would give R15 billion in small business-loan guarantees. The government will cover the first 20% of loan losses. The qualifying conditions, including the collateral requirement, have been "loosened."
2. The government intends to establish a loan guarantee assistance system for company equity-linked loans.
Economic growth
With a massive debt of R4.3 trillion, which is expected to climb to R5.4 trillion in the medium term, the Minister wants to resolve critical fiscal imbalances and restore the health of public finances, as South Africa's debt load remains a major worry.
Especially because issues such as Covid restrictions, the July turmoil in KZN, the weakening of commodity prices, and other global developments contributed to South Africa's expected economic growth is decreased to 4.8%, down from 5.1% in last year's mid-term budget address.
For all your property needs contact Knight Frank today. Our property practitioners will help assess your budget and find you the home of your dreams.
Author: Knight Frank
