2023 Budget highlights for investors
By Lizelle Steyn
22 February 2023
All in all, it seems Treasury listened to the people and it has refrained from raising the sugar tax, for example, following the floods in the areas where cane is grown, saving jobs in these industries. It has also introduced tax incentives for individuals installing solar panels at home. That aside, as an investor, these are the highlights from the 2023 National Budget delivered on 22 Feb that you'd be more interested in:
Tax-free saving and investing
No change. You can invest up to R36 000 in your TFSA in the new tax year starting 1 March '23. And the lifetime limit is still R500 000. Read more about tax-free savings accounts.
No tax on interest up to R23 800
No change. If you're under 65, you can earn up to R23 800 per tax year in interest across all your bank and investment accounts before you’ll be taxed on interest earned during the year. If you're over 65, that tax-free threshold increases to R34 500.
Capital gains tax unchanged
The CGT inclusion rate is still 40% and you don’t have to worry about the first R40 000 gain if you sell any assets during the tax year. Avoid CGT by investing in a tax-free savings account.
Dividends tax stays at 20%
No change. The dividends withholding tax rate is still 20%. Avoid this by investing in a TFSA or an RA (no local dividends tax payable within both these products).
Retirement funds just became even more attractive
All the income and gains in a retirement fund are tax-free until retirement age. And on retirement date, it used to be that the first R500 000 of the lump sum withdrawal is taxed at the 0% rate. Now that limit has been upped to R550 000.
From now till retirement, you can invest up to 27.5% of your total income in a retirement fund and those contributions will be deducted to reduce your taxable income for the year. The maximum that can be deducted from your income is R350k per tax year. But if you contribute more than the limit, that's simply carried over to the next tax year. Eventually you will benefit from your extra contributions.
For those who have the means and want to start handing over an inheritance early and thereby reduce estate duty (20%) and executors' fees (negotiable) upon death, remember that - while you're alive - you can donate up to R100 000 per tax year to your heirs before donations tax (20%) kicks in. That's R100 000 to all your heirs combined and not per individual. But you can donate every single year of your lifetime, if you're in the fortunate position to be able to do so.
Related blog post
Tax and how to avoid it as an investor
9 March 2022
Tax on investments can get complicated. It can also (legally) be avoided if you steer clear of standard taxable investment accounts. I share a recent Easy Does It podcast and some tips to help you navigate your path through the tax landscape and avoid paying unnecessary tax.