The end of the 2023/2024 tax year is just around the corner. While no one can predict what Finance Minister Enoch Godongwana will announce on the tax front in his budget speech in February, it may be prudent to take advantage of the tax benefits still in place before the current tax year ends on 29 February 2024.
To make the most of the available tax breaks before 29 February, we encourage you to:
Open a tax-free savings account (TFSA), or add to your existing TFSA – you can contribute up to R36 000 in aggregate per tax year (and up to a maximum of R500 000 in aggregate)
Make a lump-sum, tax-deductible contribution to a retirement annuity (RA), or increase your monthly RA debit order.
TAX-FREE INVESTING: 3 FUNDS
One 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. Sanlam Private Wealth has three funds available to you to invest in a TFSA: 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 make use of your annual donations tax exemption to donate up to R100 000 (R200 000 if each spouse makes use of his or her exemptions) 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.
BOOST YOUR RETIREMENT PORTFOLIO
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. You can contribute to an RA even if you’re also contributing to a pension or provident fund.
Contributions made during a tax year to all South African 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.
On 15 January 2021, President Cyril Ramaphosa signed off on new tax legislation likely to impact your RA and your preservation fund in certain instances if you decide to leave South Africa. Here’s what you need to know:
Until 1 March 2021, if you formally emigrated from an exchange control perspective (through the South African Reserve Bank), you could withdraw and externalise the pre-retirement capital from your RA (after paying retirement lump-sum tax).
As of 1 March 2021, you can now only access the pre-retirement lump-sum benefits of your RA if you’ve ceased to be an SA tax resident and remained a non-SA tax resident for an uninterrupted period of three years or more.
With regard to preservation funds, if you’ve already used the one-off withdrawal allowed before retirement, as of 1 March 2021 you will now also be able withdraw the full fund value once you’ve ceased to be an SA tax resident and remained a non-SA tax resident for an uninterrupted period of three years or more.
If you did not make use of the one-off pre-retirement withdrawal from your preservation fund, the new laws won’t apply and you will, if you ceased to be an SA tax resident, continue to have immediate and full access to the full withdrawal benefit, subject to lump-sum tax.
The three-year waiting period therefore doesn’t impact all retirement funds. It applies only to RAs and to preservation funds where the one-off pre-retirement withdrawal has been utilised. The after-tax resignation value of pension, provident and preservation funds where the one-off withdrawal has not been utilised will continue to be accessible to members who have ceased to be tax resident without the three-year rule being applied.
If you need any assistance with regard to tax-efficient investments, please contact our Fiduciary and Tax team on +27(0)11 778 6600.
we can assist you with
The formation and registration of trusts, and the provision of independent trusteeships – both local and oﬀshore.
The creation of BEE, charitable, special and Shariah trusts compliant with regulatory and legislative requirements.
The administration of deceased estates in South Africa and abroad.
Advice on complex structures, asset restructuring and bequests in foreign jurisdictions.
Advice on emigration and immigration, foreign earnings and the application of any double taxation agreements.
Updating trust deeds to ensure they’re in line with the latest changes in the trust environment.
Updating and/or drafting of wills dealing with South African and/or foreign assets.
Advice on the establishment and management of charitable organisations, their tax status and tax deductible donations.
Advice on the potential tax consequences and reporting obligations if you hold a US passport or green card, or if you have children living in the US.
Guidance on the financial implications of life-changing events, such as getting married, divorce or the birth of a child.
Sanlam Private Wealth (Pty) Ltd, registration number 2000/023234/07, is a licensed Financial Services Provider (FSP 37473), a registered Credit Provider (NCRCP1867) and a member of the Johannesburg Stock Exchange (‘SPW’).
All reasonable steps have been taken to ensure that the information on this website is accurate. The information does not constitute financial advice as contemplated in terms of FAIS. Professional financial advice should always be sought before making an investment decision.
Participation in Sanlam Private Wealth Portfolios is a medium to long-term investment. The value of portfolios is subject to fluctuation and past performance is not a guide to future performance. Calculations are based on a lump sum investment with gross income reinvested on the ex-dividend date. The net of fee calculation assumes a 1.15% annual management charge and total trading costs of 1% (both inclusive of VAT) on the actual portfolio turnover. Actual investment performance will differ based on the fees applicable, the actual investment date and the date of reinvestment of income. A schedule of fees and maximum commissions is available upon request.
COLLECTIVE INVESTMENT SCHEMES
The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium to long-term investments. Past performance is not a guide to future performance, and the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available on request from the manager, Sanlam Collective Investments (RF) Pty Ltd, a registered and approved manager in collective investment schemes in securities (‘Manager’).
Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in a portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of a portfolio and an investor will differ depending on the initial fees applicable, the actual investment date, date of reinvestment of income and dividend withholding tax. Forward pricing is used.
The performance of portfolios depend on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-dividend date. Portfolios may invest in other unit trusts which levy their own fees and may result is a higher fee structure for Sanlam Private Wealth’s portfolios.
All portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No. 45 of 2002. Funds may from time to time invest in foreign countries and may have risks regarding liquidity, the repatriation of funds, political and macroeconomic situations, foreign exchange, tax, settlement, and the availability of information. The manager may close any portfolio to new investors in order to ensure efficient management according to applicable mandates.
The management of portfolios may be outsourced to financial services providers authorised in terms of FAIS.
TREATING CUSTOMERS FAIRLY (TCF)
As a business, Sanlam Private Wealth is committed to the principles of TCF, practicing a specific business philosophy that is based on client-centricity and treating customers fairly. Clients can be confident that TCF is central to what Sanlam Private Wealth does and can be reassured that Sanlam Private Wealth has a holistic wealth management product offering that is tailored to clients’ needs, and service that is of a professional standard.