Tax Free Investments

In a previous post, we mentioned that Government was planning to introduce a tax free savings vehicle.  This has now become reality –  a tax free investment scheme was introduced in the 2015 National Budget.

Here are some of the key features of this tax free investment vehicle:

• Individuals with SA IDs can contribute up to R36 000 to this investment per annum, up to a maximum of R500 000 over their lifetime.
• Monthly debit order payments to a maximum of R3 000 per month can be made.
• There is no tax on dividends and interest.
• There is no Capital Gains Tax (CGT).
• Any amounts exceeding the R36 000 per annum contribution limit will be taxed at a rate of 40%.
• Joint ownership is not allowed.
• Government can increase the yearly contribution limit over time, typically in line with inflation.
• Withdrawals from this tax free investment can be made at any time.   However, if money is withdrawn and then reinvested into the tax free investment in the same year, it will be considered a new contribution.   For example, if an investor contributed R10 000 in a particular year and then withdrew R5 000 in the same year, he or she will only be allowed to contribute a further R26 000 in that year.
• Investment instruments available need to meet certain criteria. For example, there is a requirement that should the client need access – that the proceeds be made available within 7 working days, which limits the availability of private equity and hedge funds.

Updated March 2022

Source:  Momentum and Stanlib