Tax relief amounting to R13bn has been provided in the 2023/2024 budget to support the clean energy transition, increase electricity supply and limit the effect of high fuel prices.
In addition, the budget provides inflation-related adjustments to the personal income tax brackets, the retirement tax tables, transfer duties and excise duties for alcohol and tobacco.
A total of R4bn is provided for households that install solar panels. Individuals will be able to receive a tax rebate to the value of 25% of the cost of any new and unused solar photovoltaic (PV) panels, installed at their private residence only. The rebate can be used to offset the individual’s personal income tax liability for the 2023/2024 tax year up to a maximum of R15,000/individual.
The temporary expansion of the renewable energy incentive for companies is proposed at a cost of R5bn. The current incentive allows businesses to deduct the costs of qualifying investments over a one- or three-year period, which creates a cash-flow benefit in the early years of a project.
Businesses are able to deduct 50% of the costs in the first year, 30% in the second and 20% in the third year for qualifying investments above 1MW. Investors in PV projects of less than 1MW are able to deduct 100% of the cost in the first year.
“Under the expanded incentive, businesses will be able to claim a 125% deduction in the first year for all renewable energy projects with no thresholds on generation capacity,” the Budget Review states.
“The adjusted incentive will only be available for investments brought into use for the first time between 1 March 2023 and 28 February 2025. For businesses with positive taxable income, the deduction will reduce its tax liability.”
The Treasury gives the example of a R1m renewable energy investment that would qualify for a deduction of R1.25m. On the basis of the current corporate tax rate, this deduction would reduce the income tax liability of a company by R337,500 in the first year of operation.
The research & development tax incentive will be extended for 10 years and will be refined to make it simpler and more effective and the urban development zone tax incentive will be extended by two years to allow for a review to be completed.
To reduce pressure on households and businesses, no changes are proposed to the general fuel levy of R3.85 for 93 octane and R3.70 for diesel and the Road Accident Fund (RAF) levy of R2.18.
To limit the effect of power cuts on food prices, the refund on the RAF levy for diesel used in the manufacturing process — such as for generators — will be extended to the manufacturers of foodstuffs as from April 1 2023 until March 31 2025. The Treasury says the refund payments will take place once the system is developed.
Personal income tax thresholds have been adjusted to ensure that inflation does not automatically push personal income taxpayers into higher tax brackets. The 2023/2024 tax brackets will be adjusted in line with the expected inflation rate of 4.9%.
Medical tax credits will be increased by inflation to R364/month for the first two members and R246/month for additional members. The tax-free amount that can be withdrawn at retirement increases from R500,000 to R550,000.
Excise duties on alcohol and tobacco products will rise by the expected inflation rate of 4.9%. A 340ml can of beer increases by 10c, a 750ml bottle of wine goes up by 18c and a 750ml bottle of spirits increases by R3.90.
No increase is proposed for the health promotion levy (sugar tax) in 2023/2024 and 2024/2025. The Treasury said the government would soon publish a discussion paper on the levy for consultation on proposals to extend it to pure fruit juices and to lower the 4g threshold.
The primary rebate has been increased from R16,425 to R17,235 and the secondary rebate from R9,000 to R9,444. The tax threshold for those below the age of 65 years is increased from R91,250 to R95,750 and for those 65 and over from R141,250 to R148,217.
The brackets for transfer duty, retirement fund lump sum benefits and retirement fund lump sum withdrawal benefits will be adjusted upwards by 10% to compensate for inflation. Tax rates remain unchanged. Properties below R1.1m will not be subject to transfer duty.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.