Summary of budget 2022 tax proposals
Jenny Gordon, Head: Technical Advice, Investments, Product and Enablement at Alexander Forbes
The backdrop to this year’s budget is two years of Covid-19 and our future recovery efforts. Households are cash-strapped and trying to make ends meet arising from job losses and business failures arising from the ravages of the pandemic.
Although, in the main, it is a budget “better than expected a year ago”, job losses, mass unemployment and service delivery still loom large. The South African economy has rebounded better than expected over the past year and tax collections for 2021 are likely to exceed the February 2021 National Budget projections in the region of R182 billion. This is also more than R62 billion more than was projected in the Medium Term Policy Review, largely due to collections resulting from buoyant commodity prices. However, the Minister also noted that commodity prices slowed in the second half of 2021. Violent unrest in July and restriction in third wave eroded gains we made in the first half of the year together with industrial action in the manufacturing sector and the re-emergence of loadshedding.
Of concern still is that R330 billion of South Africa’s tax revenue is going to servicing of debt which has reached R4.3 trillion and is projected to rise to R5.4 trillion over the medium-term. Unless we strengthen the economy urgently and broaden the tax base, more borrowing might be required which we can ill afford.
GDP growth of 2.1% is projected for 2022. Over the next 3 years GDP growth is expected to average 1.8%.
SA still has a very high personal income tax (PIT) rate in world terms and PIT collections .PIT falls disproportionately on a small percentage of the tax base. National Treasury has committed to increasing the tax base through greater economic growth, employment and tax collection rather than increasing tax rates. So, we were very pleased to see the tax tables and rebates increased by 4.5 per cent to at least compensate taxpayers for fiscal drag.
The Minister followed through with the commitment to lower the corporate income tax rate to 27 per cent for companies with tax years ending 31 March 2023, alongside a broadening of the corporate income tax base by limiting interest deductions and assessed losses.
We note the intention to consult on changes to Regulation 28 shortly to enable greater investment in infrastructure by retirement funds. These changes will be gazetted next month.
The offshore limit for all insurance, retirement and savings funds is to be harmonised at 45 per cent inclusive of the 10 per cent African allowance.
We await further consultation on the two pot system and the intended draft legislation which will be published for comment in the middle of the year.
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Budget 2022 will be remembered for the following tax proposals:
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A. Personal income tax
• The personal income tax brackets and the primary, secondary and tertiary rebates will be increased by 4.5 per cent for 2022/23, which is in line with the inflation rate.
• Tax collections are expected to reach R1.55 trillion, surpassing the pre-pandemic forecasts.
• R5.2 billion in tax relief is proposed to support households.
• No general fuel levy and no Road Accident Fund levy is proposed.
• Increases of between 4.5% and 6.5% in excise duties on alcohol and tobacco.
• The employment tax incentive is expanded to encourage businesses to increase youth employment.
1. Personal tax tables for individuals and special trusts
The table below reflects the proposed personal tax tables for individuals and special trusts:
Income Tax year 2022/2023
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Taxable income (R’s) |
Rates of tax |
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R0 - R 226 001 (from R216 200) |
18% of each R1 |
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R 226 001 - R 353 100 |
R 40 680 + 26% of the amount above R 226 000 |
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R 353 101 – R 488 700 |
R 73 726 + 31% of the amount above R 353 100 |
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R488 701 – R 641 400 |
R 115 762 + 36% of the amount above R488 700 |
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R641 401 – R 817 600 |
R 170 734 + 39% of the amount above R641 400 |
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R 817 601 - R1 731 600 |
R 239 452 + 41% of the amount above R 817 600 |
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R1 731 601 and above ( previously from R1 5 77 300) |
R 614 192 + 45% of the amount above R1 731 600
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2. Tax Rebates
The table below reflects the proposed tax rebates for individuals:
The Primary, Secondary and Tertiary rebates will be increased by 4.5 per cent
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Tax rebates |
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2021/22 tax year |
2022/23 tax year |
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Primary rebate |
R 15 714 |
R 16 425 |
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Secondary rebate (applicable to taxpayers aged 65 to 74) |
R 8 613 |
R 9 000 |
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Tertiary rebate (applicable to taxpayers aged 75 and older) |
R 2 871 |
R 2 997 |
3. Tax thresholds
The change in the rebate will mean that persons with taxable income as follows will pay no tax.
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Tax thresholds |
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2021/22 tax year |
2022/23 tax year |
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R 87 300 |
R 91 250 |
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R 135 150 |
R 141 250 |
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R 151 100 |
R 157 900 |
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The few examples below illustrate the difference in tax paid by individuals in the 2022/23 tax year from that paid in the 2021/ 2022 tax year based on the tax tables and rebates.
Individuals (younger than age 65) 2022/2023
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Taxable income (R) |
Tax payable |
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R 200 000 R 500 000 R 1 000 000 R 2 000 000 |
R - 711 (- 3.5 %) - 3 320 (- 3.1%) - 4 862 ( - 1.6%) - 7 862 (- 1.1%) |
Individuals (Age 65 - 74) 2022/2023
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R 200 000 R 500 000 R 1 000 000 R 2 000 000 |
R - 1 098 (- 9.4%) - 3 707 (- 3.8%) - 5 249 (- 1 1.%) - 8 249 (- 1.1%) |
Individuals Age 75 and over 2022/2023
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R 200 000 R 500 000 R1 000 000 R 2000 000 |
R - 1 224 (-13.9 %) - 3 833 (- 4.0 %) - 5 375 (- 1.1 %) - 8 375 (- 1.2%) |
B. Estate Duty and Donations Tax
No changes announced.
With effect from 1 March 2018, the estate duty rate was increased from 20% to 25% for estates worth R30 million and more. To limit the staggering of donations to avoid the higher estate duty rate, any donations above R30 million in one tax year are also taxed at 25%.
C. VAT
There was no increase in the VAT rate from the current 15%.
D. Capital gains tax (CGT)
No changes announced to the taxation of capital gains.
The capital gains tax inclusion rates remain as follows:
• Individuals: 40% (The maximum effective capital gains tax rate for individuals remains 18%.)
- Companies: 80% (This remains the same at an effective rate of 22.4%.)
- Trusts: 80% (The effective rate applicable to trusts remains at 36%.)
- Special trusts: The maximum effective rate applicable to special trusts remains at 18%.
E. Interest Exemption
No Change. The interest rate exemptions will not be adjusted for inflation.
Individuals will be encouraged to invest in the new tax-free savings accounts instead.
In the circumstances the threshold at which tax is paid on interest income remains the same.
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Interest exemption for individuals 2022/23 |
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Under age 65 |
R23 800 |
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Age 65 and over |
R34 500 |
F. Medical Tax Credits
Government proposes an inflationary increase to the value of the medical tax credits in 2022/2023 from R332 per month to R 347 for the first two beneficiaries, and from R224 per month to R 347 for the remaining beneficiaries. It is a welcome surprise that we are continuing to see inflationary increases in the medical tax credits because it was announcement in the 2018 Budget Review that the credit would be adjusted by less than inflation to help fund the rollout of national health insurance over the medium term.
Monthly Medical Tax Credits for all taxpayers
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2021/22 |
2022/2023 |
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Member |
R 332 |
R 347 |
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First beneficiary |
R 332 |
R 347 |
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Additional beneficiaries |
R 224 |
R 234 |
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Family of four |
R 1 112 |
R 1 162 |
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Family of four annual credit |
R13 448 |
R13 944 |
G. Tax-Free Savings Accounts
No change. The amount which can be contributed to a Tax Free Savings account is
R36 000 per year. The lifetime allowance is R500 000.
H. Transfer Duty
No change.
I. Social Security
The social security grants are increased as follows
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2021/2022 |
2022/2023 |
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State old Age (over 750 War veterans Foster care Child support grant Covid 19 relief *extended for 12 months |
R1 890 R1 890 R1 910 R1 050 R 460
R 350 |
R 1 985 R 2 005 R 2 005 R 1 070 R 480
R 350 |
J. Indirect Taxes
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Total Fuel levies
General fuel levy
Road Accident Fund levy |
No Increase |
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Carbon tax
Carbon Fuel levy |
Increase from R134 to R144, effective from 1 January 2022. Increase by 1c to 9c per litre for petrol, and 10c per litre for diesel, from 6 April 2022. |
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Tobacco Products
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Increase of 6.5%
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Vaping products |
Levy to be imposed for the first time of R2.90 per ml |
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Sugar tax |
After three years of no changes, the health promotion levy will be increased to 2.31 cents per gram of sugar.
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Alcohol
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Excise duties on alcohol and tobacco will increase by between 4.5 and 6.5 per cent. The increases mean that as from today: A new tax on beer powders will be introduced from 25c per bag to 28c per bag |
K. Corporate Tax Rate
Government is restructuring the corporate income tax system in a manner that has no effect on net revenue collections. Effective for tax years ending on or after 31 March 2023, the corporate income tax rate is reduced by 1 percentage point to 27 per cent.
South Africa’s corporate income tax rate exceeds the OECD average of 23 per cent. Many countries have reduced their rates over the past 15 years. In contrast, South Africa’s statutory rate has remained at 28 per cent. Given that many countries with strong investment and trading ties to South Africa have significantly lower rates, this provides a strong incentive for tax avoidance.
Government has previously announced its intention to restructure the corporate income tax system by reducing avoidance opportunities and expanding the tax base while lowering headline tax rate. Flowing from this, Government intends restricting the use of assessed losses. The offsetting of the balance of assessed losses brought forward will be limited to 80 per cent of taxable income. This means that companies with an assessed loss balance that matches or exceeds their current taxable income will need to pay 20 per cent of their taxable income
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L . Increase and harmonisation of Offshore Limits for insurance, retirement and savings
The offshore limit for all insurance, retirement and savings funds is harmonised at 45 per cent inclusive of the 10 per cent African allowance. The previous maximum limits for institutional investors were set at 30 per cent for non-linked investors and 40 per cent for linked investors.
More detail is required on this as the impact is not entirely clear. It seems that this benefits retirement funds and linked insurance products who are permitted to increase their offshore exposure.
Authorised dealers may, on a once?off basis, remit abroad the remaining cash balances (of up to R100 000 in total) of people who have ceased to be residents for tax purposes, without reference to SARS.
M. Dividend Withholding Tax
No changes to the dividend withholding tax rate were announced which remains at 20%.
