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Source: Anchor\u00a0*The projections shown are for illustrative purposes only, and actual outcomes may differ.\u00a0<\/p>\nAs the South African tax year-end approaches, now is an ideal time to review your investment and tax strategies. Proper planning can enhance long-term growth, reduce tax liabilities, and support your financial goals. Key tools to consider include:\u00a0<\/p>\n
Tax-free\u00a0savings\u00a0accounts\u00a0(TFSAs);\u00a0<\/p>\n
Retirement annuities\u00a0(RAs);\u00a0<\/p>\n
Capital gains tax (CGT); and\u00a0<\/p>\n
Tax-free savings accounts (TFSAs)\u00a0<\/p>\n
A\u00a0TFSA\u00a0is\u00a0a highly\u00a0effective yet underutilised\u00a0vehicle\u00a0for building long-term wealth.\u00a0It\u00a0offers\u00a0unparalleled tax advantages,\u00a0key of which is the complete exemption of\u00a0all interest, dividends,\u00a0and\u00a0capital gains tax.\u00a0<\/p>\n
An individual can contribute up to R36,000 p.a. to a TFSA, with a lifetime limit of R500,000. While these limits might seem\u00a0modest,\u00a0the ability for all growth to compound tax-free can create meaningful long-term value,\u00a0especially\u00a0for\u00a0investors who contribute consistently and avoid unnecessary withdrawals.\u00a0The earlier you start contributing, the more time your money has to grow.\u00a0\u00a0<\/p>\n
When compared with taxable investments, the advantage of tax-free compounding becomes\u00a0increasingly\u00a0significant\u00a0over time, especially beyond the early years of investing.\u00a0\u00a0<\/p>\n
The benefits of a TFSA are best shown by way of example. Below, we have a projection of a TFSA based on the following assumptions:\u00a0<\/p>\n
An individual contributes the annual maximum of R36,000.\u00a0We cease contributions when we reach the overall lifetime limit of R500,000.\u00a0We assume a 10% p.a. growth rate and an inflation rate of 6% p.a.\u00a0To illustrate a comparison, we\u00a0take\u00a0an overall 25% tax rate on returns.\u00a0<\/p>\n
Figure 1: Example of a TFSA vs a taxable investment over 20 years*\u00a0\u00a0<\/p>\n
Source: Anchor\u00a0*The projections shown are for illustrative purposes only, and actual outcomes may differ.\u00a0<\/p>\n
Several strategies\u00a0can\u00a0maximise the\u00a0tax benefits of TFSAs, including:\u00a0<\/p>\n
Contributions to a TFSA on behalf of a spouse\u00a0(in South Africa, gifting money to a spouse for their TFSA contribution is exempt from donations tax).\u00a0\u00a0<\/p>\n
Opening a TFSA for\u00a0children\u00a0to maximise long-term compounding.\u00a0\u00a0<\/p>\n
Over 20 years, tax-free compounding significantly outperforms taxable accounts, illustrating the value of starting early and contributing regularly, making a\u00a0TFSA\u00a0a valuable\u00a0component\u00a0of any\u00a0diversified financial plan.\u00a0\u00a0<\/p>\n
Retirement annuities (RAs)\u00a0<\/p>\n
RAs are long-term savings\u00a0vehicles designed to support retirement planning, governed by the\u00a0Pension Funds Act.\u00a0Contributions are\u00a0tax-deductible within statutory limits, and all growth within the RA (interest, dividends, and capital gains) is tax-free.\u00a0<\/p>\n
Some of the benefits include:\u00a0\u00a0<\/p>\n
Exceptional tax efficiency:\u00a0Investing\u00a0R120,000 p.a.\u00a0over 25 years at 9% p.a.\u00a0growth\u00a0could\u00a0result in\u00a0R10.6mn\u00a0in an RA vs\u00a0R9.42mn in a direct investment after taxes.\u00a0\u00a0<\/p>\n
Figure\u00a02: RA vs direct investment values before and after tax*\u00a0<\/p>\n
Investment type\u00a0Final value excluding tax payable (R)\u00a0Tax paid on interest over the term (R)\u00a0CGT\u00a0\u00a0\u00a0(R)\u00a0Total tax payable (R)\u00a0Final value after tax (R)\u00a0RA\u00a010,600,000\u00a00\u00a00\u00a00\u00a010,600,000\u00a0Direct Investment\u00a010,600,000\u00a0796,486\u00a0382,373\u00a01,178,859\u00a0\u00a09,421,141\u00a0Source: Anchor. *Please note that the table above is only an example, and individual investors\u2019 experiences may differ.\u00a0<\/p>\n
Strategic flexibility:\u00a0RAs offer investors the power to tailor their portfolios according to their risk appetite and retirement goals, empowering them\u00a0to be in control of\u00a0their\u00a0retirement planning.\u00a0\u00a0<\/p>\n
Access and retirement benefits:\u00a0Funds\u00a0accessible\u00a0from age 55, with a\u00a0portion\u00a0available as a lump sum and the balance used to secure retirement income.\u00a0Emigrants may access\u00a0funds\u00a0after three years of non-residency, subject to tax.\u00a0\u00a0<\/p>\n
RAs\u00a0remain\u00a0a cornerstone of long-term\u00a0retirement planning,\u00a0complementing\u00a0other investments\u00a0while offering disciplined growth and tax advantages, making\u00a0them a critical\u00a0component\u00a0of a well-diversified financial strategy.\u00a0<\/p>\n
Capital gains tax (CGT)\u00a0\u00a0<\/p>\n
CGT\u00a0applies to individuals, companies, and trusts on the profit\u00a0made when certain\u00a0assets\u00a0are disposed of. It is NOT a separate tax; it is integrated with income tax, meaning that the capital gains made during a tax year are added to the taxpayer\u2019s income.\u00a0\u00a0<\/p>\n
What assets\u00a0and taxpayers\u00a0are\u00a0impacted?\u00a0<\/p>\n
CGT\u00a0applies to both\u00a0tangible and intangible assets, including\u00a0property, shares, business assets,\u00a0and\u00a0intellectual property rights or licenses.\u00a0Residents are taxed on capital gains made on their worldwide assets, while\u00a0non-residents are taxed only on profits from the disposal of\u00a0SA\u00a0immovable property\u00a0and related\u00a0rights.\u00a0Disposals\u00a0include\u00a0sales, transfers, donations, or where ownership of an asset\u00a0changes. Even if no actual transaction occurs, specific actions, such as expropriation or the destruction of an asset, can also be treated as disposals\u00a0and trigger CGT.\u00a0<\/p>\n
How capital gains are calculated\u00a0<\/p>\n
A\u00a0capital gain or loss\u00a0is the difference between:\u00a0<\/p>\n
Proceeds\u00a0(amount received), and\u00a0<\/p>\n
Base cost\u00a0(purchase price\u00a0plus improvements and related expenses.\u00a0<\/p>\n
Determining\u00a0the base cost\u00a0<\/p>\n
Assets\u00a0acquired\u00a0before 1 October 2001 or after this date\u00a0may use one of the following methods:\u00a0<\/p>\n
Market value on 1 October 2001.\u00a0<\/p>\n
Time apportionment base cost (TAB).\u00a0<\/p>\n
For assets\u00a0acquired\u00a0after 1 October 2001, the base cost is the purchase price plus improvements.\u00a0\u00a0<\/p>\n
Inclusion rates and effective tax rates\u00a0<\/p>\n
Only\u00a0a\u00a0portion\u00a0of the capital gain is\u00a0included in\u00a0the taxpayer\u2019s taxable income:\u00a0<\/p>\n
Individuals and special trusts: 40%.\u00a0<\/p>\n
Companies and other trusts: 80%.\u00a0<\/p>\n
This results in\u00a0effective tax rates\u00a0of up to:\u00a0<\/p>\n
Exemptions and relief\u00a0<\/p>\n
Annual exclusion:\u00a0R40,000 for individuals\u00a0(R300,000 in the year of death).\u00a0<\/p>\n
Primary residence:\u00a0First R2mn\u00a0is\u00a0exempt\u00a0(R1mn each if jointly owned).\u00a0\u00a0<\/p>\n
Rollover relief:\u00a0Involuntary disposals, transfers between spouses, and certain small-business\u00a0assets.\u00a0<\/p>\n
Clogged losses:\u00a0Losses between connected persons can be used only against future gains involving the same party.\u00a0<\/p>\n
Record keeping\u00a0<\/p>\n
Record-keeping is essential to avoid being taxed on\u00a0the\u00a0full proceeds.\u00a0<\/p>\n
CGT is a key\u00a0component\u00a0of South Africa\u2019s tax landscape.\u00a0Understanding how gains are calculated, available exemptions, and compliance requirements can meaningfully improve tax outcomes and support better financial planning.\u00a0<\/p>\n
Donations tax\u00a0<\/p>\n
Natural persons are entitled to a\u00a0R100,000\u00a0annual donations\u00a0tax exemption per year of assessment. Any amount donated above this threshold may be subject to donations tax at 20%\u00a0(for total taxable donations up to R30mn) and 25% (for\u00a0amounts\u00a0exceeding R30mn).\u00a0<\/p>\n
To maximise the exemption, it may be prudent to structure larger donations around the tax year-end. For example, a donation of R180,000 could be split between February and March\u00a0to utilise the exemption in two separate assessment years fully.\u00a0\u00a0<\/p>\n
Certain transfers\u00a0are not subject to donations tax, including loans, donations between spouses, and contributions to\u00a0approved public benefit organisations (PBOs). Donations to qualifying PBOs may also provide you with access to a Section 18A tax deduction, subject to SARS limits.\u00a0<\/p>\n
Individuals considering donations, particularly those as part of an estate, wealth transfer, or philanthropic planning, may\u00a0benefit\u00a0from tailored advice\u00a0to ensure\u00a0optimal\u00a0structuring and compliance.\u00a0<\/p>\n
Important information<\/p>\n
This document is provided for information purposes only,\u00a0and it\u00a0does not constitute\u00a0financial, legal or tax advice or a solicitation to invest. All investments carry risk, and the value of investments may rise or fall, and investors may not recover the full amount invested. Past performance is not an indicator of future results. While Anchor Capital has taken care that all information provided in this material is true and correct, no representation, warranty or guarantee, express or implied, is given as to its correctness, completeness, or fitness for purpose. Anchor Capital, its directors, employees, and agents, accept no liability for any loss, damage, or expense (whether direct or consequential of any nature whatsoever) which may be suffered as a result of the use of, or reliance on, this material or which may be attributable, directly or indirectly, to the use of or reliance upon any information, links or service provided through this material.\u00a0<\/p>\n
There is no warranty of any kind, expressed or implied,\u00a0regarding\u00a0the information or any aspect of this service. Any warranty implied by law is hereby excluded except to the extent that such exclusion would be unlawful.\u00a0<\/p>\n
Readers should seek personalised advice from a duly licensed advisor. All investments are subject to standard FICA identity and\u00a0sourceoffunds\u00a0checks\u00a0<\/p>\n
\u00a9 2009-2025 Anchor Capital (Pty) Ltd. An Authorised Financial Services Provider Reg No \/\/ 2009\/016295\/07 | FSP # 39834\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"As the South African tax year-end approaches, now is an ideal time to review your investment and tax…\n","protected":false},"author":2,"featured_media":311214,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,133,131,132],"class_list":{"0":"post-311213","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-ca","10":"tag-canada","11":"tag-finance","12":"tag-personal-finance","13":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/311213","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=311213"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/311213\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/311214"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=311213"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=311213"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=311213"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}