Tax-free Saving Account
What is a Tax-free Saving Account
A Tax-Free Savings Account allows you to save or invest money without paying tax on the returns or withdrawals.
Tax Free Investment
Although you don’t get a tax deduction for money you invest in a tax-free investment, you can still enjoy tax-free growth. And you won’t pay any tax on the proceeds when you decide to take money out of the investment.
You can invest up to R36 000 every tax year (R3 000 per month) in a tax-free investment, limited to R500 000 over your lifetime. Government may adjust these limits from time to time.
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Tax free investment
Although you don’t get a tax deduction for money you invest in a tax-free investment, you can still enjoy tax-free growth. And you won’t pay any tax on the proceeds when you decide to take money out of the investment.
You can invest up to R36 000 every tax year (R3 000 per month) in a tax-free investment, limited to R500 000 over your lifetime. Government may adjust these limits from time to time.
Benefits of a tax-free investment
- Invest from R500 per month, limited to R36 000 every tax year.
- Only certain investment solutions are available for a tax-free investment. We will assist you in choosing the most suitable investment solutions.
- You have full access to your money at any time, but the benefit becomes more meaningful the longer you stay invested.
4 Mistakes to advoid
The annual TFSA allowance is a ‘use it or lose it’ allowance – whether you withdraw a portion or the full balance of your TFSA investment, you cannot reinvest the amount withdrawn.
The contribution of up to a maximum of R36 000 per year into a TFSA is the limit for your total contributions for the year – not per fund.
1. Withdrawing from our TFSA
2. Over-contributing to your TFSA:
If your annual contribution exceeds a total of R36 000, you will be taxed 40% so it is important to manage contributions accurately.
3. Thinking you can catch up:
The contribution limit to your TFSA is capped at R 36 000 annually regardless of your prior contributions. Should you have neglected to contribute during the previous year, you cannot claim that allowance in any subsequent years.
4. Thinking that the limit makes the investment insignificant:
The power of compound interest works in your favour, especially if you do not withdraw funds from your TFSA.
With a maximum investment of R 36 000 per year, the benefit can be utilised for nearly 14 years before the lifetime limit of R 500 000 is reached.
With an average return of 10%, your invested capital can grow to just over R 1million over the time period.
That equates to a return of R 500 000 in interest that is not taxable when you withdraw it at the end of the investment period.
Financial advice
Our financial advisers are here to assist you in choosing and implementing the right retirement solution for you