BUSINESS NEWS - When Finance Minister Enoch Godongwana delivers Budget 3.0 on Wednesday, 21 May, the spotlight will shift to how National Treasury intends to plug the R75-billion shortfall created by shelving the VAT hike.
“With 56% of South Africans already living below the upper poverty line, government may steer clear of obvious tax hikes and instead use more subtle measures that still squeeze household budgets,” says Jonathan Spencer of OneDayOnly.co.za.
These could include:
- Bracket creep, where inflation-linked salary increases push earners into higher tax brackets, quietly raising their tax liability without changing tax rates.
- Reduced medical aid tax credits, particularly for higher-income earners, which could increase the burden of healthcare costs.
- Higher fuel levies and excise duties, or so-called “sin taxes”, which may go unnoticed initially but ultimately drive up the cost of everyday living.
“In short, households will continue to feel the pinch from shrinking disposable income to higher transport costs,” explains Spencer.
As 80% of South Africans say financial stress is taking a toll on their mental health, he shares five practical tips to help them beat Budget 3.0:
- Watch for Hidden Tax Hikes: Even modest salary increases can push you into a higher tax bracket. With 79% of consumers expecting their income will grow in the coming months, they should consider tax-efficient savings tools like tax-free savings accounts or retirement annuities to reduce their taxable income.
- Audit Your Subscriptions: Scrutinise monthly debits and cancel underused services like streaming platforms, gym contracts, or premium apps you no longer need.
- Reduce Fuel Costs: Rising fuel levies - a concern for 58% of South Africans - can quickly add up. Carpool, use public transport, or consolidate trips to save at the pump.
- Shop Smarter: Always be on the lookout for deals and discounts. Over time, and if done collectively, smarter shopping habits could help South Africans save more than R10 billion by 2030.
- Maximise Your Medical Aid: Evaluate whether your current plan still offers the best value. Switching to a more cost-effective plan, after doing a proper cost-benefit analysis, can free up cash without compromising your healthcare needs.
“By staying informed and taking proactive steps to manage expenses, South Africans can cushion the possible impact of Budget 3.0 and maintain greater control over their financial wellbeing, regardless of how Treasury chooses to balance the books,” concludes Spencer.
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