February 23, 2022

Budget Review 2022


  • Tax revenue strengthened significantly in recent months and is expected to reach R1.55 trillion for 2021/22, well above prior projections.
  • Given the revenue improvement, Government proposes R5.2 billion in tax relief to help support economic recovery, provide some respite from fuel tax increases and boost incentives for youth employment.
  • Most of the relief is provided through an adjustment in personal income tax brackets and rebates. In addition, there will be no increase in either the general fuel levy or the Road Accident Fund (RAF) levy.

The main tax proposals for 2022/23 are:

  • Inflationary relief through a 4.5% adjustment in the personal income tax brackets and rebates.
  • An expansion of the employment tax incentive, through a 50% increase in the maximum monthly value, to R1 500.
  • No change to the general fuel levy or the RAF levy.
  • Increases of between 4.5% and 6.5% in excise duties on alcohol and tobacco.
  • As announced in the 2021 Budget Speech, the corporate income tax rate will be reduced from 28% to 27%. Base‐broadening measures will be implemented to ensure that there is no effect on revenue

Proposals affecting the retirement fund industry

  • Regulation 28

Regulation 28 of the Pension Funds Act, 1956 provides maximum investment limits for retirement funds. The Minister of Finance initiated a process to amend this regulation to enable greater infrastructure investment by retirement funds and improve data reporting on such investment by retirement funds. The amendments have been through two rounds of public consultations and will be gazetted into law by March 2022.

Comment:  This is to be welcomed as it makes it easier for retirement funds to invest in infrastructure projects.

  • Offshore investments

An increase in the offshore investment limit for retirement funds to 45%, inclusive of the 10% African allowance.

Comment:  Since the late 1990’s, there has been a gradual increase in foreign exposure limits as a currency control measure, which allows for greater flexibility.

  • Twopot retirement system

The discussion paper Encouraging South African Households to Save More for Retirement was published in December 2021. It outlines a set of proposed reforms to enable pre‐retirement access to a portion of a member’s retirement savings, while ensuring that the remainder is preserved for retirement, even when changing jobs. Public comments on the tax treatment of contributions to the two-pots are being reviewed in preparation for public workshops, to be followed by legislative amendments, which will be published for comment in the middle of 2022.

Part of this proposal includes the possibility of short-term access to retirement savings by members, which would be dependent on approval by the trustees of each fund.

Comment: The two-pot system combined with compulsory preservation provisions has been welcomed by the industry as it will lead to increased preservation of retirement savings, which will ultimately lead to better retirement outcomes.

  • Governance of umbrella funds

The two-pot system paper was accompanied by a discussion paper Governance of Umbrella Funds, which seeks to improve the governance of retirement funds, particularly commercial umbrella funds. The Minister said that work on the above will continue during 2022.

Comment:  The focus on umbrella funds illustrates their growing importance in the retirement fund industry.

  • Reviewing the transfer of total interest in a retirement annuity fund

The Income Tax Act allows members of retirement funds to transfer their retirement interest from one retirement fund to another. This provision is subject to certain conditions, for example, the individual may only transfer from a less restrictive to a more restrictive retirement fund. In the case of retirement annuity funds, the total interest in the transferor fund must be transferred. These conditions result in retirement annuity fund members with more than one contract in a particular retirement annuity fund being restricted from transferring one or more contracts from one retirement annuity fund to another. However, members of a preservation fund are not restricted on the proportion of their retirement interest that can be transferred into another fund. To address this anomaly, government proposes changing the legislation to allow fund members to transfer one or more contracts in a particular retirement annuity fund, subject to certain conditions to ensure that the current minimum thresholds are not contravened.

Comment:  This proposal supports portability of retirement fund benefits, which is welcomed by the retirement fund industry. Furthermore, from a retirement planning perspective, this change is welcomed because there may be sound reasons for the member to only transfer one of his/her contracts in a retirement annuity fund to another retirement annuity fund.

  • Clarifying compulsory annuitisation and protection of vested rights when transferring to a public sector fund

The T-day (compulsory annuitisation) amendments to the Income Tax Act came into effect on 1 March 2021, with the protection of vested rights that arose before 1 March 2021. The policy acknowledges and protects vested rights and as a result were separated from new rights (those arising after 1 March 2021). Vested rights may be transferred into another retirement fund without forfeiting their vested rights protection, irrespective of the number of transfers effected.

It has come to Government’s attention that an unintended consequence of the current provisions is that the protection of vested rights would be forfeited if a transfer is made into a public sector fund. This is because the definitions of pension and provident fund in the Income Tax Act do not make any reference to the protection of vested rights for individuals who were members of a provident or provident preservation fund as at 1 March 2021. To address this anomaly, Government proposes amending the definitions of pension fund and provident fund to ensure that vested rights remain protected even if they are transferred to a public sector fund.

Comment:  Addressing this anomaly is welcomed.

  • Clarifying compulsory annuitisation of public sector funds

The T-day reforms, effective 1 March 2021 also provided that members of provident funds, including public sector pension funds that operate like provident funds (allow for more than 1/3 lumpsum at retirement), are required to receive their benefits as annuities on retirement. However, the definition of gross income in section 1 of the Income Tax Act does not mention public sector funds that fall within the definition of provident fund.

Government proposes that the Act be clarified to ensure that gross income includes all public sector funds, confirming that annuitisation is applicable to public sector funds as well. These amendments will take effect from 1 March 2022.

Comment:  This clarifies that the policy intention is for compulsory annuitisation to also apply to public sector funds. However, the proposed amendment would in our view not necessarily resolve the current uncertainty in this regard. Furthermore, any correction in this regard should be made retrospectively, with effect from 1 March 2021 and not 1 March 2022 as proposed.

  • Retirement of a provident fund member on grounds other than ill health

Due to the annuitisation of provident funds, it is no longer necessary to differentiate between a pension and provident fund for retirement purposes. However, paragraph 4(3) of the Second Schedule to the Income Tax Act treats pension and provident funds differently. According to this paragraph, if a member of a provident fund who is younger than 55 retires from that fund for reasons other than ill health, any lump sum received shall be taxed as a withdrawal benefit rather than a retirement benefit. This does not apply to members of pension or retirement annuity funds. To address this anomaly, government proposes to delete paragraph 4(3) of the Second Schedule to the Act.

Comment:  This proposal is in line with the general harmonisation of retirement funds.

  • Clarifying the applicability of tax neutral transfers from a pension to a provident fund

Prior to the annuitisation of provident funds, transfers to a provident or provident preservation fund were taxable if the transfer was made from a fund with mandatory annuitisation requirements (pension funds, pension preservation funds, retirement annuity funds). From 1 March 2021, and in accordance with paragraph 6(1)(a) of the Second Schedule to the Income Tax Act, transfers to a provident or provident preservation fund would be tax neutral irrespective of the type of retirement fund from which the retirement interests were transferred. Both before and after 1 March 2021, the policy intent is for these transfers to be tax neutral.

It has come to Government’s attention that the current provisions create an anomaly:  transfers from a pension fund to a provident fund related to contributions made before 1 March 2021 are not tax neutral. Government proposes that contributions to a pension fund before 1 March 2021 also receive tax neutral transfer status.

Comment:  This change is welcomed.

  • Crossborder tax treatment of retirement funds

Consultation regarding the 2021 proposal on the tax treatment of retirement interest when changing tax residence showed that multiple tax treaties need to be revised to ensure that South Africa retains taxing rights on payments from local retirement funds. Government intends to initiate these negotiations this year.

Comment:  We foresee that this proposal will not be easy to implement given the fact that there are numerous tax treaties that will have to be renegotiated with various countries.

Other matters of interest

  • The Conduct of Financial Institutions Bill

The National Treasury has revised the Conduct of Financial Institutions Bill based on feedback from stakeholders. The Bill is expected to be tabled in Parliament in early 2022. It will empower the Financial Sector Conduct Authority (FSCA) to deliver the mandate set out in the Financial Sector Regulation Act (2017), which includes the fair treatment of customers and the integrity of the financial system.

  • Transformation

The FSCA will publish its transformation strategy in February 2022, outlining its approach to promoting financial sector transformation within the existing policy framework, including the Financial Sector Regulation Act, and under the future Conduct of Financial Institutions Bill. It will set out how the FSCA intends to effect key proposals in the Bill.  The strategy will be published for public comment and consultations will be held with stakeholders. The subcommittees of the Financial Sector Transformation Council have been reviewing the transformation targets in the Financial Sector Code. They are expected to conclude their review and submit the revised targets for approval this year. The Department of Trade, Industry and Competition will publish the revised targets for public comment.

Comment:  This is an important topic within the financial services industry and we will continue to engage in consultations in this regard.

  • Financial inclusion strategy

The National Treasury facilitated workshops with stakeholders during 2021 to discuss the comments received on the draft policy paper An Inclusive Financial Sector for All. The policy framework, aimed at promoting financial inclusion in South Africa, has been revised and will be finalised for formal adoption. The National Treasury will work with industry, civil society working groups and forums to develop a financial inclusion strategy to implement the new policy framework from 2023 to 2033, by setting targets and monitoring and evaluation mechanisms.

  • Social protection

The 2022 Budget provides for a 12‐month extension of the R350 per month special Covid‐19 social relief of distress grant. This will ensure the continuation of public support for poor households as the pandemic recedes. The Minister noted that nearly half of the population currently receives at least one social grant from the state.

Three new allocations are made to social grants, including:

    • R44 billion in 2022/23 to continue the special COVID‐19 social relief of distress grant (R350 per beneficiary) for another 12 months.
    • A total of R1.6 billion in the next two tax years to initiate a new extended child support grant for orphans who have lost both parents, in order to encourage the care of orphans within families rather than foster care.
    • A total of R13.1 billion in the next two tax years to offset budget reductions made in the 2021 Budget and provide for inflationary increases to permanent grants.

Average monthly social grant values:

Rand 2021/22 2022/23 Percentage increase
Old age 1 890 1 985 5.0%
Old age, over 75 1 910 2 005 5.0%
War veterans 1 910 2 005 5.0%
Disability 1 890 1 985 5.0%
Foster care 1 050 1 070 1.9%
Care dependency 1 890 1 985 5.0%
Child support 460 480 4.3%

Source: National Treasury

  Tax research and reviews

  • A discussion document will be published in 2022 on a personal income tax regime for remote work.
  • A review of the exemption of foreign retirement benefits in domestic tax legislation will be conducted.
  • A review of depreciation and investment allowances will take place during 2022/23, followed by the release of a discussion document.
  • Government will review the approach to adjusting thresholds for inflation.

Personal income tax

  • Income tax brackets

If the personal income tax brackets were not adjusted, revenue would have increased by R13.5 billion. This relief is mainly targeted for individuals in the middle‐income group.

Personal income tax rates and bracket adjustments:

Taxable Income (R) 2021/2022 Rates of tax Taxable Income (R) 2022/2023 Rates of Tax
R0 – R216 200 18% of each R1 R0 – R226 000 18% of each R1
R216 201 – R337 800 R38 916 + 26% of the amount above R216 200 R226 001 – R353 100 R40 680 + 26% of the amount above R226 000
R337 801 – R467 500 R70 532 + 31% of the amount above R337 800 R353 101 – R488 700 R73 726 + 31% of the amount above R353 100
R467 501 – 613 600 R110 739 + 36% of the amount above R467 500 R488 701 – R641 400 R115 762 + 36% of the amount above R488 700
R613 601 – R782 200 R163 335 + 39% of the amount above R613 600 R641 401 – R817 600 R170 734 + 39% of the amount above R641 400
R782 201 – R1 656 600 R229 089 + 41% of the amount above R782 200 R817 601 – R1 731 600 R239 452 + 41% of the amount above R817 600
R1 656 601 and above R587 593 + 45% of the
amount above R1 656 600
R1 731 601 and above R614 192 + 45% of the
amount above R1 731 600





Tax threshold

Below age 65

Age 65 and over

Age 75 and over


R15 714

R8 613

R2 871



R87 300

R135 150

R151 100






Tax threshold

Below age 65

Age 65 and over

Age 75 and over


R16 425

R9 000

R2 997



R91 250

R141 250

R157 900

Source: National Treasury

  • Medical tax credits

Medical tax credits will increase from R332 to R347 per month for the first two members and from R224 to R234 per month for additional members.