Find out all you need to know about the eagerly awaited Budget Speech of 2018.
Five key take-outs from the 2018 Budget speech
- VAT to increase by 1% to 15%
Government will be increasing VAT by one percentage point, from 14% to 15%, effective from 1 April 2018. This is the first time we have seen an increase in VAT since 1993 – 25 years ago. The minister says the increase is necessary to meet new spending commitments and prevent further erosion of the public finances. Research by the Davis Tax Committee showed that a hike in VAT would have the smallest negative impact on overall growth and job creation – relative to measures required to raise the same amount of revenue from corporate and/or personal income tax hikes.
- New tax measures to raise an additional R36 billion in 2018/19
South Africans heard this week that 2018 tax increases will not include any year fiscal drag relief. Renowned economic journalist, Alec Hogg says this means that an effective R14bn extra tax burden will fall on those earning over R410 000 a year.
- Estate duty for estates greater than R30 million increases to 25%
While there was no introduction of a wealth tax as such, high net worth individuals with estates worth more than R30 million will see the estate duty payable on their estates increasing to 25% from 1 March this year. “These clients should consult with their financial advisers as soon as possible to ensure that there is sufficient liquidity in their estate to absorb the estate duty costs,” says Harry Joffe, Head of Legal Services at Discovery Life.
- Offshore allocation limits for institutional investors are to be increased by 5 percentage points across all categories
The benefit of this is that individuals who invest in, for example, endowment policies via an institution can now enjoy the increased offshore exposure up to 30%. The special allocation for African investments (outside of South Africa) also increases by 5% going up to 10%.
- Increased and improved efforts to be made to trace beneficiaries of unclaimed fund payouts
The minister announced in the Budget Speech this week that retirement funds are to consult with Nedlac (National Economic Development and Labour Council) on more efficient measures to trace beneficiaries when fund payouts are unclaimed. To date proposed amendments have been made to the Pension Funds Act to provide for a Central Unclaimed Retirement Benefit Fund to house all unclaimed retirement benefits. The Financial Services Board (FSB) indicated last year that this could possibly be expanded in the future to include other sectors such as insurance and banking. According to the Association for Savings and Investment South Africa (ASISA), within long-term insurance policies and collective investment scheme portfolios, there were 130 740 cases of unclaimed assets worth R4.4 billion as at 31 December 2016.