Budgeting tips and tricks for the upcoming tax year

South Africans can expect more changes on the horizon in this upcoming tax year, as the Ministry of Finance attempts to mitigate the financial failings of 2017. After being downgraded to junk status last year, the country is well and truly hanging its head in financial shame, and it is clear that there is a lot of work to do to improve (or simply stabilise) the situation.

According to an article published on BusinessTech, the “government is looking to implement a total of ZAR30-billion in tax hikes and more than R50-billion of spending cuts in 2018” to help cover its revenue shortfall. Trusts, companies, domestic residents and expatriates are all potential targets in the February 2018 budget review (21 Feb), and taxpayers wait with baited breath for their fate to be announced.

After the Medium Term Budget Policy Statement (MTBPS), which was delivered in October 2017, a number of analysts noted their concern that South Africa has already reached its limit in terms of how much it can extract from taxpayers. In an article published on Biz News, the author argues that “the South African tax base cannot support the current debt trajectory… There are simply not enough wealthy South Africans to make even a small dent in the mountain of debt. Even the new super tax bracket of 45% on taxable income above ZAR1.5-million, imposed from 1st March 2017, is only scheduled to collect an additional ZAR4-billion from just 103,000 taxpayers.”

Although it may be the case that everyone is already overstretched, it’s important to still be prepared for substantial further tax increases, and to plan accordingly in order to protect your financial situation. Don’t be complacent, as it is likely that these increases will not just affect the wealthy, but almost all South African taxpayers may well see an increase in personal tax.

Given that additional strain may soon be placed on the country’s tax base, while debt levels rise and controversial taxes, such as the carbon tax, are explored, here are 7 tips and tricks that will help you to budget for the upcoming tax year.

  1. Project your budget for the next fiscal year through “zero-based budgeting”. This is a technique by which all expenses must be justified. Start from a zero base, and analyse all your needs and costs based on whether they serve you, rather than simply continuing to budget for something because you have always done so out of habit.
  2. Crunch the numbers by looking at all incoming and outgoing costs carefully, no matter how big or small. By keeping track of your spending, it will hopefully become apparent whether you can cut back on certain costs. For example, this could be as easy as finding a cheaper mobile phone plan or eating out less at restaurants.
  3. Regularly assess your progress by making a ‘money date’ with yourself to review your financial portfolio, and ensure you are sticking to your budget. If you are having difficulties or wish to make any changes, don’t hesitate to arrange a meeting to work out how to get on track. And if you achieve any notable goals, then think of small rewards that will serve as motivation to keep going.
  4. Budget for growth by prioritising the things that will increase your financial wealth and well-being in the long-term, as well as keep your bills paid in the short-term. Don’t neglect your savings, as investing in your future now (even if it’s only a small amount each month) can significantly help to achieve your goals.
  5. Arrange a meeting with your accountant to ensure you understand your tax liabilities for the upcoming tax year. Once you have determined these, you can budget accordingly and review whether you are entitled to any personal deductions.
  6. Automate your savings by contributing to a financial plan by direct debit. It’s also a good idea to take advantage of the technology at your fingertips by downloading any apps that could help you to budget or find deals easily.
  7. Shop smartly by signing up to loyalty schemes at your favourite stores, then rack up the rewards or plan your purchases around special offers. Buying in bulk and saving coupons can also be useful.

Given the country’s current deficit, along with the recent announcement that the government intends to implement fee-free higher education, which is estimated to cost an additional ZAR40-billion, it is safe to assume that tax increases this year are going to be substantial. Start making preparations now to allow for these changes, and budget for your future.

Posted in Blog.