Two of the available relief measures are:
- Making a lump-sum, tax-deductible contribution to a retirement annuity (RA), or increasing your monthly RA debit order
- Opening a tax-free savings account (TFSA) or adding to your existing TFSA – you can contribute up to R33 000 in aggregate per tax year (and up to a maximum of R500 000 in total).
Investing in an RA is an excellent way to save on tax and give your retirement portfolio a boost – you won’t pay any dividends tax, and income and capital gains tax won’t apply to the assets managed. Should you emigrate, you can externalise the capital from your RA (after retirement lump-sum tax), and in the event of your death, the benefit from your RA will fall outside your estate for estate duty purposes.
You can contribute to an RA even if you’re currently also contributing to a pension or provident fund. Contributions made during a tax year to all South African retirement funds – including RAs – are tax deductible up to a maximum of 27.5% of your taxable income, but subject to an annual ceiling of R350 000. Contributions in excess of these limits that have not been allowed as a tax deduction may be carried forward.
A further way to capitalise on existing tax breaks is by contributing to a TFSA – you’ll pay no tax on interest, dividends or capital gains. TFSAs offer different investment options to suit your objectives and risk profile. As a client of Sanlam Private Wealth, you can make a TFSA investment into one of three funds: the Sanlam Global High Quality Feeder Fund, the Sanlam Private Wealth Equity Fund and the Sanlam Private Wealth Balanced Fund.
In addition, a TFSA provides you with a unique opportunity to donate up to R100 000 per year to your children without incurring donations tax. It can therefore provide you with an alternative estate planning tool, as the funds will be invested in your children’s names in a tax-efficient investment.
If you need any assistance with regard to tax-efficient investments, call Stanley Broun on +27 (11) 778 6648 or email him at firstname.lastname@example.org.