2025 Budget Speech and Anticipated Carbon Tax Developments

It has been rescheduled to tomorrow (Wednesday, 12 March).

A key point of anticipation is the announcement regarding Phase 2 of the Carbon Tax. The budget presentation is expected to address this, along with the subsequent release of draft Phase 2 Carbon Tax legislation for public comment later in 2025. The final legislation is anticipated to be enacted by the end of this year, effective 1 January 2026.

The stakeholder consultation for National Treasury’s Phase 2 of the Carbon Tax discussion paper (”the discussion paper”) took place on 16 January 2025, and received significant stakeholder participation. Many stakeholders voiced their opinions on the discussion paper. We are hopeful that National Treasury has considered these responses, and we are eager to see if National Treasury will make the following potential announcements in tomorrow’s budget:

• Extension of Section 12L: Continued incentives for taxpayers investing in energy efficiency.
• Basic Tax-Free Allowance: Possible extension for existing basic allowances to remain in place for the medium term, contrary to the reductions by 10% in 2026, and by 2.5% per year thereafter from 2027 to 2030 as proposed in the discussion paper.
• Carbon Budget Allowance: An extension to the voluntary carbon budget allowance until 31 December 2025 after which the allowance will fall away.
• Carbon Offset Allowance: An increase in the carbon offsets allowance as an additional incentive to support carbon offset projects, with the voluntary carbon budget allowance of 5% falling away after 2025.
• Trade Exposure Allowance: Maintaining the qualifying trade intensity at 30% to qualify for the full trade exposure allowance, rather than to increase to 50% as proposed in the discussion paper.
• Utilisation Period for Carbon Offsets: An extension to the utilisation period for carbon offsets generated from projects approved before the introduction of the carbon tax until 31 December 2028.

We will provide a detailed overview of the Carbon Tax proposals following tomorrow’s rescheduled Budget Speech.

Please stay tuned for our follow-up communication, as we’re committed to keeping you informed with the most relevant updates.