With the total tax burden of South Africans on the rise, it’s time to look more closely at those products that give you that much needed tax break. Retirement annuity (RAs) have been around for many years and most investors are familiar with this product, but tax-free savings accounts (TFSAs) were only introduced in 2015, and is fast gaining popularity among retail investors – for obvious reasons.
The three-year anniversary of the first tax-free unit trusts launched in 2015 is coming up and you’ll be pleasantly surprised at the superior three-year returns compared to their standard, taxable counterparts, particularly for pure equity and high equity funds. Not paying any dividends tax now and no capital gains tax in future will make a dramatic difference to your pocket. So, make sure to use this tax year for planting the seeds for a tax-free harvest in future.
South Africans are not saving enough. In fact, Reserve Bank stats show a rapidly deteriorating savings culture. While we saved on average 10% of our disposable income in the 1970s, this figure has now dropped to zero. That's why National Treasury has introduced tax-free savings accounts to reignite a savings culture. Designed to encourage long-term savings, while giving your clients access to their funds at any time, these accounts offer an excellent savings opportunity.