On the threshold

Various statutory thresholds in South Africa haven’t been adjusted in years. In an economy with inflation averaging just over 5% per year nominal thresholds lose value over time, with very real implications. Tax burdens are silently shifted and target markets for government entitlements lose their focus. In this blog we explore some of these thresholds and compare what they are with what they should be had they kept pace with inflation. We start with death and taxes.

Death

Various thresholds impact on estate management. Estates below the Small Estates Threshold of R250 000 can be wound up via a cheaper and simpler process at the Master’s Office. This threshold was last adjusted at the end of 2014 and would be over R431 000 today. At the other end of the scale, estates of up to R3.5 million are exempt from estate duties. That threshold was set in 2007. It would be over R9 million today.

Taxes

Tax related thresholds are also noteworthy. Small Business Corporations can register to pay lower taxes if their gross annual income is below R20 million per annum – a threshold set in 2013. In today’s terms this threshold is over R37 million. Businesses that are even smaller can register to pay turnover tax, if their turnover is below R1 million per annum, a threshold set in 2009 which equates to R2.25 million today. Finally, the VAT threshold was also set at R1milion in that year.

Likewise, companies with an annual payroll of more than R500 000 are required to pay the Skills Development Levy of 0.5% of Payroll; this threshold was set in 2005. Had it kept pace with inflation it would be around R1.5 million in today’s Rand terms.

Hiring

Companies that generate revenue of less than R10 million per annum are classified as BEE exempt micro enterprises and are automatically assigned a Level 4 BEE status. This threshold was gazetted in 2015 and has not been adjusted since. Had it kept pace with inflation, the threshold would be closer to R17 million.

Subsidies

Turning to entitlements, the monthly household income threshold for beneficiaries of subsidised housing has remained at R3 500 since the dawn of democracy and would be almost R19 000 today. Likewise, the household income threshold for NSFAS bursaries was set at R350 000 per annum in December 2017. In today’s Rands that would be around R518 000.

The chart below contains these and a few other notable thresholds. We display two numbers for each threshold; the nominal value of the threshold plotted on the year it was gazetted and the CPI adjusted value of the threshold at the end of 2025, or what it would be today had it kept pace with inflation. Click on the label for a short explanation of the threshold.

THE IMPACT OF INFLATION ON STATUTORY THRESHOLDS

How were these thresholds set in the first place? That is a good question – and one that we don’t expect has a good answer. The fact that many thresholds remain unchanged despite the administrative ease with which many could be adjusted suggests they are, at best, arbitrary. After all, if they genuinely mattered they would be adjusted.

When it comes to taxes and entitlements, inaction is rarely accidental. It is a deliberate policy choice: the equivalent of appearing to be asleep on the job while being very much awake. Fiscal drag, or bracket creep, quietly increases tax revenues, while static eligibility thresholds ration access to increasingly expensive entitlements. With a bit of luck, taxpayers and beneficiaries scarcely notice, political costs are avoided and everyone stays happy.

In other cases, threshold stasis is less a matter of design than of disorder. It is symptomatic of fragmented mandates, weak coordination, and a generally chaotic approach to governance. Threshold adjustment will eventually happen but only when a sector is on the precipice of a catastrophic disaster and policymakers are jolted into action.

The longer a thresholds remain unchanged, the more we are inclined to think someone, somewhere has fallen asleep.

Time, as they say, to rise and shine Mzansi.