Archive | August, 2015

Tax Free Savings account Vs Discretionary investment

The investor in a tax-free savings account would accumulate R1 594 794 over the period if the nominal portfolio return is 12% per annum (12.68% annualised). The discretionary investor with a marginal tax rate of 30% will only accumulate R1 419 450 over the same period (after tax).The tax benefit of the tax-free savings account really becomes significant over a period of 15 or 20 years. Investors who stay invested over the long term and resist the urge to cash out the funds will reap the rewards. As far as the discretionary investment is concerned, interest is taxed at the individual’s marginal rate and dividend withholding tax of 15% applies. At the end of the investment period capital gains tax is levied. In comparison all proceeds on the tax-free savings account are 100% tax-free.

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