Tax Free Investments: Where the Smart Money Is

Someone once said: nothing is certain but death and taxes. While we can’t cheat death there might just be a way to invest your money so that it stays exactly that – your money. As of March the 1st 2015 all South Africans have access to tax free investments.

Sounds too good to be true?

Well, actually it’s exactly what it says on the box. The recent publication of the Taxation Laws Amendment Bill allows an individual to invest up to R30 000 per year, with a lifetime contribution of R500 000, into a savings account, fixed deposit, unit trusts, retail savings bonds and exchange-traded funds.

All returns on this investment will be entirely tax free – including all interest, dividends and any other forms of capital gains. It’s kind of similar to a Retirement Annuity but instead of the tax break at the start of the investment you get it on the returns, and you can access it at any time, with zero penalties.

Where can I get this investment?

The simple answer is: just about everyone. FNB, Nedbank, and the other colours of the banking rainbow all offer tax free savings accounts.

On the unit trust side of things you can get similar offerings from Old Mututal, Prudential, PSG and many others. You can also choose a risk level when it comes to unit trusts, allowing for the potential of greater growth compared to a pure savings account.

If you’re after exchange traded funds, Satrix offer a very simple product that allows you to do a yearly lump sum or a monthly contribution.

Can I do more than one?

The simple answer is yes. You may have as many tax free investments as you like, as long as you stay below the R30 000 yearly limit.

If you exceed the yearly limit, the National Treasury will impose tax penalties, so keeping track of how much you invest is paramount.

You will also be able to move money between tax free investments from March 2016. This means you can not only spread your money over several investments but move money from one to another, depending on performance.

So what’s the catch?

For once there doesn’t seem to be one. Tax free investments are the perfect starting point for any investor, or a nice cherry on the top for a seasoned pro.

While the yearly investment cap isn’t astronomical, some shrewd investing in low, medium and high risk options could pay excellent dividends in the future.

The most appealing part of such an investment is that you can access the money at any point. This means that if some sort of financial emergency does come up, you know you can withdraw your money at any point without any charges or tax implications. Considering South Africans, on average, only save somewhere in the region of 8-10% of their annual income, these tax free investments are the perfect way to start planning for the future.


BY  ON APRIL 15, 2015