By John Manyike
South Africans may be breathing a sigh of relief following yesterday’s Budget and the news that they can look forward to tax breaks for installing solar panels, no increases to the fuel levy and Road Accident Fund and that social grants are to be increased.
But, cautions, for most upsides, there is often also a downside.
For instance, consumers celebrating the allocation of R4 billion in tax relief for people installing solar panels on their roofs can expect a boom in sales of solar panels.
With increased demand, however, comes pressure on supply and the real possibility that prices of panels and installations may spike, somewhat neutralising the benefit of going solar.
The Competition Commission could play a significant role in helping all South Africans by ensuring that this relief has the desired result and that anti-competitive behaviour in the sector is avoided.
Some tax highlights for individuals include personal tax relief in the form of inflation-linked adjustments (4.9% on average) for bracket creep with a specific focus on benefiting those earning less than R750 000, an increase in the minimum tax threshold, below which no tax is payable, by 4.9% to R95 750 for those under the age of 65 (>65 years of age, now R148 217 and >75 years of age, R165 689).
The impact of inflation-adjusted personal tax tables and retirement taxes on take-home pay must be fully assessed. Increasing these levels by the inflation rate could reduce levels of disposable household incomes where many current wage increases have been way below the inflation rate of around 7%.
The welcome news that the government is moving to extend the diesel fuel levy refund to food manufacturers for two years to ease the impact of energy prices on rising food prices will also have to be assessed over the long term.
Although in these tough economic times, consumers are right to welcome any relief, individuals should be cautious about extending their credit and growing household debt burdens that are already absorbing a significant part of their monthly incomes.
Cushion yourself by being modest in credit consumption. Being financially responsible in these tough times means only borrowing when it is extremely necessary.
Just because you qualify for a certain credit limit doesn’t mean you should take the extra cash offered that you don’t necessarily need. Avoid the temptation of extending the credit so you can buy items you don’t really need.
We live in uncertain times when prices constantly change and can rapidly alter personal finances.
Being financially cautious is advisable in an environment where, for example, frequent changes in fuel prices automatically drive up costs across all sectors.
Already, pundits are predicting that fuel prices could jump next month because of expected weakness in the rand and volatile oil trading markets.
The wise consumer absorbs what the Minister of Finance has announced, looks to parts of the budget that offer hope, but still takes a cautious approach to personal finances by saving where possible so that any unexpected financial storms can be handled.
John Manyike, head of Financial Education at Old Mutual.
*The views expressed here are not necessarily those of IOL or of title sites.
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