Save this Tax Season

No doubt you are now back to full productivity and maybe even planning and looking forward to a little romantic getaway with the one you love in this month of romance. Something I’m sure not many of us are looking forward to, however, is ensuring our tax returns are all in order before the tax year end so tax is the focus of this newsletter. We talk about some of the best tax-free and tax-saving investments that you can make this year and Retirement Annuities are what we like to call our tax-saver ‘superhero!’ Hopefully we can help you to save plenty of money in 2023, so let’s dive right in…

RAs – the tax-saver Superhero of investments!

Everyone who pays taxes and tries to save some money to invest should know about RAs. This is just a summary but there are many reasons that RAs are seen as the ‘Superhero’ of tax-free investments.

After all, what is not to like about a tax-free saving that generally gets good returns on your investment, gives you a great retirement package, and best of all saves you a big chunk of your payable tax if a portion of your salary is being invested in them?

Right now as the tax year is closing if you have managed to save any surplus capital it’s a great idea to put it into your RAs – as long as it doesn’t exceed your annual limit of 27.5% of taxable income or earnings per annum and this is subject to a capping of R350 000 too.

Remember too that Investors don’t pay capital gains tax, dividends withholding tax, or income tax on the investment growth in any retirement fund, and this includes pension, provident, and Retirement Annuity funds.

So, apart from the obvious tax benefits, other benefits of RAs are that?

a)???upon retirement, you can withdraw R500 000 tax-free from your Retirement funds if none have been used previously on withdraws or retrenchments, which benefits you by creating future liquidity.

b)???your interest in retirement funds is exempt from estate duty, making them highly effective as estate planning vehicles.

The restrictions are only that you can only access an RA before you turn 55 if you become permanently disabled or emigrate from South Africa and you’re obliged to use a minimum of 2/3rds of the funds to purchase either a life or living annuity policy to give you retirement income.

More heroes that give tax savings and flexibility

There are other great tax-savers too, which are very effective and which you need to have within a holistically structured portfolio giving you, short and long-term diversity and flexibility. These are…?

? TFSA - The tax benefits of a TFSA derive from tax-free interest and dividends generated in the TFSA and no capital gains tax is paid on withdrawal. There are limitations to the amount you can invest though - a maximum of R36 000 per tax year and your total lifetime contribution is also capped at R500 000.?

Endowments - These demand a solid commitment as they have to be a minimum of 5 years and can only be drawn on once in that period, but they do offer tax benefits to investors with a marginal tax rate of more than 30% as it reduces the tax payable on your investment growth.?

Unit trusts - Very flexible, unit trust investments are popular and could also assist in terms of tax savings. However, If you are under the age of 65 up to R23 800 of interest paid locally and R40 000 capital gain is tax exempt.

There is so much more to know about all these investments and that’s exactly where I come in. Let me help you in 2023 to capitalise on all the best tax-saving investments – starting right now!

Talk to me today about your financial year-end review!