Take your tax breaks now
You get tax benefits for contributing more to your retirement fund, or with a tax-free investment. Have you maximised your tax benefits for this tax year? It’s best to do it now, before 28 February 2020.
Top up your retirement fund
Each person who earns an income can make a pre-tax contribution to his or her retirement fund every year. The benefit is that you get back part of what you invest. This money can then be invested again, so that you benefit more and more from compound growth – the magical growth one gets from growth on interest.
You can contribute up to 27,5% of your taxable income or your salary before any deductions are made (whichever is higher). This contribution may, however, not be more than R350 000 per year. Or, if it is more than R350 000, you won’t be able to claim back the amounts above R350 000 in that tax year. You can carry over contributions to the next tax year and claim it then, or from tax year to tax year until you retire.
If you have not yet maximised the 27,5% benefit with your regular contributions, add a lump sum contribution to your retirement annuity (RA) or pension fund before 28 February 2020 to benefit from further tax savings.
Go tax free with a tax-free investment
Government wants to make saving easier, so we can invest up to R33 000 per year of after-tax money in a tax-free investment (TFI) account, capped at a total of R500 000 during one’s lifetime.
This allows you to enjoy growth that is free of dividends tax and tax on interest, and you pay no capital gains tax on money that you withdraw.
Your investment is not taxed, so you’ll have a larger balance that is growing tax free, for as long as you remain invested.