Yesterday, the Minister of Finance Mr. Enoch Godongwana
tabled his maiden Budget speech. Minister Godongwana proposed no significant
tax hikes to personal income taxes along with maintaining the current VAT rate
for the 2022/2023 tax year.
The Minister highlighted South Africa’s continued commitment
to proceed with fiscal discipline, however, South African taxpayers will have
to see whether the proposed changes to Government expenditure can be
implemented.
Key changes in
the Budget?
Tax relief for individual taxpayers with
personal tax rates and rebates adjusted upwards by 4.5% in line with expected
inflation.
Corporate tax rate to decline to 27% effective
for years of assessment ending on or after 31st March 2023.
Offshore investment limits in retirement savings
set to increase from 30% to 45%
Increase in excise duties, but no additional
increases to the fuel tax levy or the Road Accident Fund
Chief Economist for Stanlib, Kevin Lings, described the Budget as a cautious Budget with the Minister largely delivering a Budget that was in line with market expectations.
Investors are reminded that the end of the tax year is almost upon us. Investors can reduce their taxable income by contributing to a retirement annuity. Should you wish to reduce your tax liability please contact the office soonest to ensure that your contributions are deductible for this financial tax year.
“Government’s view of the economy could be summed up in a few short phrases; If it moves, tax it. If it keeps moving, regulate it. And if it stops moving subsidize it.” Ronald Reagan
On 4th January 2022, Acting Chief Justice Raymond Zondo released the Judicial Commission of Inquiry into State Capture Report Part 1. The Commission was set up to inquire into allegations of state capture, corruption and fraud in the public sector and organs of state. I am three-quarters of the way through reading the report and I am absolutely astounded by the levels of state capture, corruption and fraud identified by Justice Zondo. One can only be dumbfounded by the corruption of a coterie of fraudsters brazenly helping themselves and digging deep into public sector funds. A feeling of outrage swamped me. This is hard-earned taxpayers’ money that has been purloined! I asked myself: Am I paying too much tax? Do I think that tax revenue is being spent wisely? I pose these questions to you.
In 1991 in an
Australian Senate Inquiry, the media and publishing magnate, Kerry Packer,
bristled at the questioning: “I am not evading tax in any way shape or form.
Now, of course, I am minimising my tax. And if anybody in this country doesn’t
minimise their tax, they want their head read. Because, as a Government, I can
tell you, you’re not spending it that well that we should be donating extra.”
Minimise
your taxable income, maximise your tax savings!
With the end of the tax year (29th February 2022)
fast approaching, you are reminded of the opportunity to minimise your tax
liability by investing into a retirement annuity and maximise your tax savings
by contributing to a retirement annuity or a tax-free investment.
The financial year-end is just around the corner. You may wish to consider increasing your retirement annuity debit orders or making lump-sum contributions to your existing retirement annuities.
Retirement
Annuities – Save for retirement in a tax-efficient way.
Retirement annuities are a great way to save
for retirement and for reducing your annual tax payments. Here are some
of the benefits:
Contributions are tax-deductible up to 27.5% of
the higher of your remuneration or taxable income, to a maximum of R350, 000.
There is no dividend withholding tax, income or
capital gains tax applicable on retirement annuities
Unclaimed or disallowed contributions may be
deducted on retirement.
At retirement, the remaining value (minimum
two-thirds) may be transferred to an annuity to provide a regular monthly
income in retirement.
Tax-Free
investments
Tax-Free Savings Accounts provide South African investors
with a new opportunity to save towards a specific goal or supplement their
retirement savings. As tax-free investments are not subject to income or
capital gains tax, they provide a convenient and flexible way to accumulate
savings over time.
Investors may currently contribute a maximum of R36 000 per
tax year into a tax-free investment, which equates to a maximum debit order of
R3000 per month. There is also a lifetime contribution limit of R500 000. A
word of caution! Any amounts contributed in excess of these limits will be
subject to 40% tax payable by the investor.
Please contact us early if you would like to add to your existing retirement annuities or invest into a tax-free investment as there is always a logjam towards the end of February.
“A cat’s New Year dream is mostly a bird! Don’t be like a cat; in your New Year dream something that you have never dreamed. Target for new things.” -Mehmet Murat Ildan
The Covid-19 pandemic has had a huge impact on all our
lives, from our family and friends to colleagues and employees. We all know
someone who has died or has become grievously ill! The impact on the life
insurance industry has been pronounced, as depicted in the claims statistics
that insurers shared in relation to the pandemic.
The insurance industry will have paid out a staggering R25
billion in extra death claims by the end of the third wave. The claims
statistics indicate a direct link between vaccinations and a reduction in
claims and they are therefore promoting vaccinations as the right thing to do.
These claims represent a traumatic loss of life with far reaching consequences,
but the insurance companies are unequivocal that vaccinations have a positive
impact in reducing COVID related deaths.
Two life insurance companies have advised that with effect
from the 1st December 2021 they will require the official digital
vaccination certificate as an underwriting requirement when applying for life
cover. The other insurance companies will no doubt follow suit soon.
Whilst we all have the right to choose whether to be
vaccinated or not, those who choose not to be vaccinated pose a greater risk to
the insurance companies and they therefore may experience higher premiums
depending on their risk factors.
How
have the markets performed in 2021? Despite the COVID-19 pandemic, 2021 has
been a good year for investors!
The year-to-date figures as at the 26th November
2021 were:
The Johannesburg Stock Exchange All-Share Index: 20%
The MSCI AWCI Index: 27.1% [in Rand]
[The MSCI All Country World Index (ACWI) is a
stock index designed to track broad global equity-market performance.
Maintained by Morgan Stanley Capital International (MSCI), the index is
comprised of the stocks of about 3,000 companies from 23 developed countries
and 26 emerging markets.]
The South African Unit trust industry has also provided
excellent performance!
The average fund in the South African General Equity
sector achieved: 20.57% [high risk]
The average balanced fund in the Multi-Asset High Equity
sector achieved: 15.18% [medium risk]
The average fund in the Multi-Asset Low Equity sector
achieved: 9.68% [lower risk]
[Figures supplied by
Morningstar. The year-to-date figures as at the 31st October 2021
were:]
So, some cheerful new as we approach the festive season! May
you all be filled with the blessing of Christmas!
Christmas
Shutdown
Our offices will be closed for the festive season from
Thursday 16th December 2021 and will re-open on Monday 10th January
2022.
We at Kevin Mills Financial Services CC, Greg, Leonie, Kevin and Colleen wish all our clients, family and friends a Blessed Christmas and Happy New Year! Let us all pray that the New Year will bring an abundance of joy and peace.
“For unto you is born this day in the city of David, a saviour, who is Christ the Lord” Luke 2: 11
