Finance

Tax-Free Savings Accounts

Saving for old age or even just for a rainy day is not possible to for many people. The emergence of the sandwich generation, the high debt levels and the pressing economy is all factors that has led to South Africans saving less and less.

Many are not aware that SARS has introduced savings models that helps you grow your money by reducing the tax effect on these saving products. The introduction of the National Tax-Free Savings Accounts was Treasuries answer to try and assist growing a nation of savers (not spenders), and to increase saving levels in the economy overall. The name might be misleading … a savings account… but these ring-fenced accounts can include various underlying assets, including cash and equities.

Who may invest in the National Tax-Free Savings Account?

A natural person that has the following:

  • South African Tax Number
  • South African residential address
  • South African ID 

What are the tax benefits?

Tax Free Savings Account will be exempt from the following taxes as long as the invested amount remains in the account:

  • No withholding tax on interest
  • No withholding tax on dividends
  • No tax on Interest
  • No Capital Gains Tax (when you switch or make a withdrawal)

What is the limits of a tax free savings account?

An individual has an annual contribution limit of R36 000p.a, and a lifetime contribution of R500 000 limit.

I have opened these accounts for the whole family (yes mom included) and the process is very easy and all major players have launched their own tax-free savings products. Each of my kids are now the proud owner of a equities based tax free savings account and I do hope that I can also do my bit to start a culture of saving.

We use EtfSA as they have some of the best fee structures in the market. 

 

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