Optimising annual tax benefits

April 21, 2024
Elke Brink
Elke Brink

Are you optimising your annual tax benefits? (And are you aware of them)

Optimising your annual tax benefits form a key component of a resilient portfolio. 

Firstly, referring to retirement funds. This can consist out of a combination of a retirement annuity in your personal capacity. But also a provident and/or pension fund with your company. 

You are allowed to save up to 27.5% of your annual taxable income/remuneration in a combination of these products and claim these contributions back from SARS (up to a maximum of R350 000 per year). This 27.5% can also include additional income sources for eg. Rental income.

I dont know about you but I quite enjoy the feeling of receiving funds Back from SARS. And saving for retirement sufficiently at the same time. 

Secondly, if you have a tax-free investment in place. Now will be the time to ensure you are optimizing your annual limit as well. If you dont have one yet, get one! This product offers incredible long-term benefits.

You are allowed to save R36 000 per year in this investment, and R500 000 in your lifetime. Should you exceed these limits you will be taxed at 40%. These limits only refer to the physical contributions made this means the investment has endless growth opportunity after you have invested. 

This is an excellent product to also include in your portfolio as your retirement planning. It will take you roughly 14 years to reach the R500 000 lifetime limit. At that stage the investment can easily have achieved a fund value of R1million (assuming a 10% rate of return). Lets assume you leave these funds invested for another 10 years and you are sitting at closer to R2.5million.

These funds will be completely tax-free once you start withdrawing. Essentially you can earn a monthly income from this investment at retirement without paying a single cent tax on it.

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