From 1 March 2015 the Government introduced the concept of tax free savings. From that date individuals are permitted to invest R30 000 per annum (R2 500 per month) to a nominated “tax free savings account”. The maximum which can be invested in these accounts is R500 000 per individual. This is a lifetime cap and may not be exceeded. Should more than the R30 000 be invested in any given tax year then there is a penalty of 40% imposed by SARS. Therefore great care has to be exercised when making these investments to ensure that the laid down parameters are not exceeded.
The term “tax free” in this instance means no income tax, capital gains tax or dividend withholding tax is applicable to these accounts.
Since the introduction of these accounts, most financial institutions have been bringing out their own tax free versions. Many are still to be introduced over the next few months. So far these range from ordinary interest bearing accounts and deposits to a range of unit trusts either stand alone accounts or, in some cases, via unit trust platforms where an investor can have a spread of funds. The latter allows investors to switch easily from different investment funds and types.
We believe it is certainly worthwhile taking a closer look at what is on offer.