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 Oct 23, 2015

Yes, there's really absolutely no tax to be paid on tax-free savings/investment options or its returns. The catch? Well, there’s a couple of strict T’s and C’s. Here’s how it works...

Where did tax-free saving options come from?

It’s not just us; the government also wants you to save-up! That’s why, in March of this year, the government introduced a tax-free savings account to encourage South Africans to save up and avoid that deep dark pit of debt.
That’s why various service providers and banks can now offer you tax-free savings accounts.

What’s the catch?

There isn’t really a catch. The tax-free concept is not a marketing scheme, it’s the governments attempt to make citizens become money smart.

When South Africans save for those rainy days; when they make long-term investments and when they think long-term financially and save up for their kids’ education, the whole country’s economy benefits.
Still there’s a couple of strict T’s and C’s meant to regulate the use of tax- free saving options.

Here are the T’s and C’s:

  • You can only put away R30 000 in total every tax year and you can only put away a grand total of R500 000 during your lifetime across all your tax free investments (you can have as many as you like). If you exceed these totals, you’ll be fined by SARS with 40% of the amount that exceeds these maximums - so keep a wary eye on what you put into your tax-free accounts.
  • You can withdraw money at any time and you don’t have to pay exit penalties. However, whatever you withdraw can’t be replaced. That means whatever you put in amounts to the total limit you can put in - whether or not you withdraw it later.
  • The tax-free option is only available with new investments.
  • You can’t do any direct transfers from your tax-free savings account, so make sure the account belongs to the person you intend it for, e.g. your child. Legislation might change to allow transfers by 1 March 2016.
Take note that every bank or financial service provider will have their own T’s and C’s linked to their specific offering, for instance a specific minimum monthly contribution. 

Drop us a mail right here, and we'll help you find a tax-free option that works for you.

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