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2016 national budget speech: What it means for growing your business

Mobile businessAnother year, another Budget speech, as the nation eagerly awaited what the newly appointed finance minister had to say about the next fiscal year. Despite last Wednesday’s Budget speech being generally well received, there is always an impact on individuals and business. We’ve summarised the key points  that will impact small businesses, and what these may mean for growing your business in 2016 and of course, some insight into how your personal pocket will also be affected.

R5.5bn of tax will be saved by low to middle income earners over the next year

Perhaps the best piece of news delivered by Gordhan was the decrease in tax for low to middle income earners. Under the new budget, taxes will fall by about 0.41% – from 17% to 16.59% per every R1 earned. This might not sound significant, but over the course of the year this will add up. Refer to Fin24’s income tax calculator to find out how much you could save on your income. Not only will this affect your personal income and how you go about growing your business – money you save on tax can be put back into your venture, for example – its great news for anyone you employ in your business.

The price of plastic bags will increase by 2c

Gordhan also touched on factors that will have a direct effect on small businesses operating specifically within the retail sphere. The plastic bag levy will increase from 6c to 8c per bag – meaning that an extra 2c will be passed onto your customers. You might therefore consider offering customers paper bags, or encouraging customers to bring their own bags when shopping.

The sugar tax on sweetened beverages has arrived

The date for the new sugar tax implementation has yet to be confirmed, but when it is, sugary and sweetened beverages – and possibly sweetened foods – will be subject to a levy. Everything from fizzy drinks to energy drinks, and even fruit juices, will incur the new tax, although the precise amount by which these drinks is set to increase has not been confirmed. If you run a convenience store, or a restaurant or café, and want to keep growing you business, you might consider finding alternative product lines – healthier, sugar-free foods, for example.

‘Sin’ taxes continue to increase on all types of alcohol and tobacco

You could apply the same tactic in response to the planned rise in ‘sin’ tax on goods such as beer, wine, spirits and tobacco, which is to come into effect at the beginning of April. While the new tax might deter moderate users of alcohol and cigarettes, it is unlikely to influence more habitual buyers, as the price of alcohol and tobacco tends to be inelastic. That said, if you run a licensed premises, and fear that your customers are likely to curb their drinking in response to the increase in the ‘sin’ tax, running happy hours and specials could help in growing your business. For a detailed breakdown of how much the tax on each beverage will increase by, refer to Fin24’s budget round up video.

The increase in the general fuel levy will affect most businesses

The general fuel levy hike of an extra 30c per litre, which also comes into effect on 1st April, will impact all businesses, especially those who rely on road transport to acquire supplies or deliver products to their customers because it automatically pushes the price of fuel up. The knock-on effect of the levy will eventually increase the price of goods, which could make growing your business more challenging. Look for alternative ways to deliver your goods, or opt for local suppliers instead of those based outside your province or country. It’s also important to remember that the increase in the fuel levy is separate from fluctuations in the price of fuel from month to month, which also have an impact on the down-stream price of goods and services.

Thinking of selling assets? You’ll be affected by the increase in capital gains tax

Finally, if you plan on selling any property or investment assets, Gordhan’s planned increase to capital gains tax might impact your business growth strategy. The tax will increase from 18.6% to 22.4%. If you’re selling any assets, we recommend that you speak to a tax consultant to better understand the implications.

Whatever the economic climate, having the right merchant services makes it easier to thrive

The 2016 Budget plan might create challenges for growing your small business, but, with planning and the best suppliers, you can turn any threat into an opportunity. Choosing the right merchant services for your business will ensure you can transact simply and efficiently. If you’d like to read more about gearing your business for success, and how merchant services can help you do this, download our e-book.