WHAT DOES THE BUDGET SPEECH 2020 MEAN FOR THE PROPERTY SECTOR?

WHAT DOES THE BUDGET SPEECH 2020 MEAN FOR THE PROPERTY SECTOR?

Finance Minister Tito Mboweni delivered the much-anticipated Budget Speech 2020 on 26 February, addressing major economic concerns across industries and sectors.

 Mboweni announced that South Africa would be utilising appropriate measures of fiscal discipline to cut expenditure, while not overwhelming citizens with taxes.

“Even after a decade of weak economic performance, South Africa still boasts deep and liquid capital markets, strong institutions, the most diversified economy on the continent, and a young population.” – Finance Minister Tito Mboweni

In his speech, Mboweni did, however, deliver some welcome news for the real estate industry. 

Here is a look at how the Budget will affect the property sector in South Africa:

Transfer Duty Threshold Adjusted

The most important news regarding real estate is that the threshold for transfer duty would be adjusted, with properties costing R1m or less escaping transfer duty altogether. 

This is fantastic news, particularly for those individuals about to purchase their first home, as it will make buying property more accessible. 

TRANSFER DUTY (1 March 2020 – 28 February 2021) 

  • R​1 – 1000 000​ ​(0%)
  • R1 000 001 – 1 375 000 ​(3% of the value above R1 000 000)
  • R1 375 001 – 1 925 000 ​(R11 250 + 6% of the value above R 1 375 000)
  • R1 925 001 – 2 475 000 ​(R44 250 + 8% of the value above R 1 925 000)
  • R2 475 001 – 11 000 000 (​R88 250 +11% of the value above R2 475 000)
  • R​11 000 001 and above ​(R1 026 000 + 13% of the value exceeding R11 000 000)

Personal Income Tax

The relaxation of Personal Income Tax was also declared in the Budget Speech – with tax brackets being adjusted above the inflation rate. 

Mboweni stated that to support economic growth, the government would not introduce any significant tax increases, offering some relief to personal income tax. 

“This Budget means that a teacher who earns on average R460 000 a year, will see their taxes reduced by nearly R3 400 a year. Hard-working taxpayers, who earn, on average R265 000 a year, will see their income tax reduced by over R1 500 a year. Our income tax system is progressive, and the adjustments reflect this. Someone earning R10,000 a month will pay 10% less in tax. Someone earning R100,000 a month will pay about 1.5% less.” – Finance Minister Tito Mboweni

TAX RATES (1 March 2020 – 28 February 2021)

  • R1 – 205 900 (18% of taxable income)
  • R205 901 – 321 600 (37 062 + 26% of taxable income above 205 900)
  • R321 601 – 445 100 (67 144 + 31% of taxable income above 321 600)
  • R445 101 – 584 200 (105 429 + 36% of taxable income above 445 100)
  • R584 201 – 744 800 (155 505 + 39% of taxable income above 584 200)
  • R744 801 – 1 577 300 (218 139 + 41% of taxable income above 744 800)
  • R1 577 301 and above (559 464 + 45% of taxable income above 1 577 300)

No Hike in VAT

While there were many predictions leading up to the Budget Speech, Mboweni announced that there would be no increase to the value-added tax (VAT) rate, which is currently set at 15%.

This decision provides some relief for property sellers who are registered for tax purposes. If a seller is registered for VAT, the purchase price of a property will include VAT, which is payable by the seller upon transfer. 

Employing Youth

According to Mboweni; “8.2 million young people between the ages of 15 and 34 are not in education, employment or training. Raising skills and improving the matching of young people and jobs is an important focus of the Presidential Youth Employment Intervention.”

The Budget will, therefore, make provisions for the Jobs Fund Projects, which deals with the high levels of youth unemployment. To date, the initiative has created more than 175 000 permanent jobs and 21 000 internships for young South Africans. 

This is fantastic news for the property industry as according to recent statistics, approximately 34.5% of recent buyers in Durban fall between the ages of 18 and 35. With more young people becoming financially independent, more individuals in this age bracket will qualify for home loans and enter the property market. 

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