What is it?
Tax Free Investments were introduced as an incentive to encourage household savings. No income tax, dividends tax or capital gains tax is payable on the returns from these investments.
The annual limit to February 2021 is R36 000. Any portion of unused annual limit is forfeited (that is, it is not carried forward to the subsequent year of assessment). On the contrary, a penalty of 40% is paid on the excess amount above R36 000. There is also a lifetime limit of R500 000 per person.
Any person (including minor children) can have more than one tax free investment, however, the annual limitation is an aggregation per every year of assessment. For example you can invest R11 000 (Old Mutual), R11 000 (Investec) and R14 000 (Absa).
Your investment can be paid to your beneficiaries immediately and there are no executor fees.
Three tips to maximise your Tax free Savings account
1) Increase your regular contribution to R3 000 per month.
2) Those who prefer to invest via a lump sum will benefit by doing so at the beginning – rather than the end – of the tax year, giving their investment an extra 12 months of tax-free growth.
3) Include sufficient growth assets (no limits apply) to maximise long-term growth.
Contact one of our advisors for more information.
Phone: 011 803 9686
Email: vivian@pbafsa.co.za or bev@pbafsa.co.za
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