The end of February – and the end of tax season – is nearly here. If you’re like most South Africans who aren’t tax experts, you probably find the subject of tax intimidating and overwhelming. But the final stretch of this season brings some great investment opportunities. That’s because, while paying tax is unavoidable, there are some investment products specifically designed to reduce how much tax you pay whilst also helping you build your wealth over the long term. Here are three options:
- Retirement annuities (RAs): Retirement Annuities allow you to claim tax deductions on your contributions, up to certain limits*. This can lower your taxable income now; while helping you save for retirement at a future date.
- Tax-Free Savings Accounts (TFSAs): These give you tax-free growth on your contribution and returns. With a TFSA, you don’t receive an upfront deduction, but any growth and withdrawals are completely tax-free, which adds up over time. TFSAs are capped at R36 000 per tax year.
- Pension and provident funds: Usually offered by employers to employees, contributions to a pension or provident fund are tax deductible and subject to the same limits as RA’s. Both pension fund products are also exempt from CGT, Tax on income and Dividends Tax.
What should you do now?
If you want to make the most of the tax year before it ends, here’s what you can do:
- Make a once-off lump sum contribution to your Retirement Annuity or increase your monthly debit order if your budget allows.
- Open a Tax-Free Savings Account if you don’t already have one or top up your contributions before the annual limit resets.
This is also a good time to check in with your financial advisor. Reviewing your portfolio with them before the new tax year starts can help you make sure your investments are still in line with your goals, and that you’re making the most of our country’s tax benefits.
‘* Limited to the lower of R350,000 per year or 27.5% of your Income
Still need help when it comes to tax-efficient investments? Speak to us today.