The response from most pundits to last week’s budget was that it was boring and predictable. To be clear, that’s not an insult, it’s a compliment. You don’t need surprises from a budget, and you don’t want it to take three tries to get passed.
For me, the budget was far from boring. Finance minister Enoch Godongwana hit the right notes, expanding wealth tools in the budget that haven’t been updated in a decade or more.
Budgets are supposed to be fair and transparent, yet governments the world over use stealth taxes to hit the populace. For example, the capital gains tax (CGT) exemption was last adjusted to R40,000 in 2012, then nothing for more than a decade. At the very least, it should be increasing by inflation every year; if it had been adjusted as such, the exemption would now be almost R80,000. Instead, it was raised to just R50,000 last week. Still, it’s better than no adjustment.
Godongwana also moved the death exclusion from R300,000 to R440,000 and increased the primary residence rebate from R2m to R3m.
Governments the world over use stealth taxes to hit the populace
The annual tax-free savings limit is another example. It was last adjusted from R33,000 to R36,000 in 2020. Now there has been an increase to R46,000. The lifetime limit has not changed, but that’s moot as annual contributions are still below the lifetime limit.
The annual deduction for contributions to retirement funds increased from R350,000 to R430,000 (or 27.5%, whichever is lower).
The single discretionary allowance limit was doubled to R2m.
Some of these changes are small and modest, considering what inflation has done to the limits in the many years of no adjustments.
Even so, for investors it is all good news. What these changes show is that obviously there were different voices around the table for this budget. Speaking with deputy finance minister Ashor Sarupen after the budget, it was clear he was front and centre in proposing these changes.
Another significant change that will help grow the economy pertains to small businesses.
The VAT compulsory registration threshold has been adjusted from R1m to R2.3m. This is huge; VAT is an admin nightmare no small business needs. The CGT exclusion for the disposal of small business assets by individuals (aged 55 or older) also increases from R1.8m to R2.7m. And the annual limit for turnover tax has gone from R1m to R2.3m, making life a lot easier for many.
So perhaps it was a boring and predictable budget for some. But for the first time in years there were significant changes for investors and small businesses. Let this be the start of regular inflation-linked adjustments — we shouldn’t have to wait another decade.
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