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Take-home pay positive in January, but bracket creep a threat for tax payers

Details

BankservAfricaThe Citizen reports that take-home pay showed a year-on-year increase in January, continuing its upward movement as the high rate of inflation moderated. This provided some relief to salary earners.

However, stormy clouds are on the horizon, particularly for tax-paying South Africans. According to the BankservAfrica Take-home Pay Index (BTPI), the nominal average take-home pay was R15,670 in January, representing a 9.1% year-on-year increase. However, this was off a low base and showed a 1.5% growth on the R15,533 recorded in December. Real take-home pay, namely the amount received after tax, insurance and other deductions, was also higher at R13,968 in January, a 3.5% year-on-year improvement. This suggested that the significant erosion of the purchasing power of salary earners during 2023 was easing off. However, a salary increase could push salary earners into a higher income tax bracket and affected individuals could end up paying tax at a higher rate and take home a lower salary than before the increase. This phenomenon, also known as ‘bracket creep’, will earn the government R16.3 billion more in taxes in the 2025 financial year. The BankservAfrica Private Pensions Index (BPPI) showed that the nominal private pension fell slightly to R10,616 in January 2024 compared to the previous month’s R10,642, but was still 5.7% higher than a year ago. Consumer inflation is expected to average around 5.3% in 2024 compared to 6.0% in 2023 after reaching 6.9% in 2022.

  • Read the full original of the report in the above regard by Ina Opperman at The Citizen
  • Read too, Moderating inflation cushions take-home pay but bracket creep a threat, at BusinessLive (subscriber access only)


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