Budget Speech 2023: Key highlights

A summary of the most important general and investment-related updates from the 2023 budget speech.

The 2023 Budget speech was delivered against the backdrop of high living costs, a dismal unemployment rate and intensive loadshedding crippling businesses, all of which are placing severe strain on South Africas economic recovery and growth. 

Finance Minister Enoch Godongwana provided some relief by proposing no significant tax increases to the major revenue-generating categories, such as personal income tax and value-added tax, for the 2023/2024 tax year. This signals continuity from the 2022 Budget and echoes the governments commitment to economic growth, while acknowledging the adverse impact of tax increases.

Around 60% of government expenditure is allocated to the social wage to provide support to the most vulnerable and help alleviate poverty and hunger. Existing social grants have been increased to cushion against rising inflation.

General key take-outs

- The personal income tax brackets and rebates have been adjusted in line with the expected inflation rate of 4.9%.

- Individuals who install rooftop solar panels will be entitled to a tax rebate of 25% of the cost of the panels, up to a maximum of R15 000, to promote additional electricity generation. This incentive will only be available for one year and is not available for inverters or batteries.

- No changes have been made to the general fuel levy or the Road Accident Fund levy to reduce pressure on households and businesses. 

- Excise duties on alcohol and tobacco (known as sin taxes) will increase by 4.9% in line with expected inflation. 

- The diesel fuel levy refund will be extended to food manufacturers for a period of two years, from 1 April 2023 to 31 March 2025, to limit the impact of power cuts on food prices.

Investment related key take-outs

Personal income tax: Individuals and special trusts Personal income tax brackets will be fully adjusted for inflation for the 2023/2024 tax year. The highest marginal tax rate for individual taxpayers remains unchanged at 45%. The personal income tax rates for the 2023/2024 tax year are listed below. [Refer to figure 2]

Capital gains tax (CGT): The CGT inclusion rate for individuals and special trusts remains at 40%. The annual exclusion for a capital gain or loss granted to individuals and special trusts remains at R40 000. The exclusion granted to individuals remains R300 000 in the year of death.

Interest exemptions: The exemption on interest earned for individuals younger than 65 years remains R23 800 per annum.

Dividends tax: Dividends tax remains at 20% on dividends paid by resident and non-resident companies for shares listed on the JSE. Foreign dividends received by individuals from foreign companies are taxable at a maximum effective rate of 20%.

Tax-free savings account (TFSA): The annual cap on contributions to tax-free savings accounts remains at R36 000 from 1 March 2023, with the lifetime limit also remaining at R500 000 

At-Retirement lump sum taxation: At retirement, the first R550 000 of a retirement lump sum will be tax-free. [Refer to figure 3]

Pre-Retirement lump sum taxation: The first R27 500 of a pre-retirement lump sum withdrawal will be tax-free. The table below illustrates how withdrawal lump sums will be taxed: [Refer to figure 4]