Have you made the most of your tax free savings?

National Treasury introduced tax free savings accounts (TFSA). From 1 March 2015, we can all invest in tax free investments. This means that any interest, dividends and capital gains will not be taxed if you use the (TFSA). You can invest up to a maximum of R30 000 in TFSA in a tax year.

If your contribution towards tax free investment is more than R30 000 in a tax year, you will be taxed at 40% – so make sure that you stay within your limit. So far, we all have a maximum of R500 000 in a lifetime to invest using tax free investments. You can withdraw your money at any time and the withdrawals will also be tax free. You cannot replace withdrawn amounts. Like any other investment, you are likely to see growth in your money if you invest for the long term. It is therefore a good idea to use the tax free investments for long-term investments, for example:

  • To save for the university fees of your children, if  your kids are still young or  you don’t have them as yet
  • To save for a deposit of your first home, if you have just started working and will only be buying your first home in at least 5 years’ time or even longer
  • If you are working at the moment but you plan to start your own business later on in your career, you can save the money now to help you when you start your own business
  • You can also open a tax-free account for your children and grandchildren

If you have at least R500 per month and you can put this away for a few years to come, then you can contact me to invest it for you using one of the tax-free investment vehicles. Satrix ETFs also offer tax-free investments. For more on Satrix, read the last chapter in my book From Debt to Riches: Steps to Financial Success.