Tax Efficient Investment Opportunities | Legacy BlueStar | Sanlam Financial Planners Bellville, Cape Town


Tax-efficient investment opportunities

Paying tax is a bugbear, especially when it comes to the money we save. Ryno Oosthuizen, Business Development Manager at Glacier by Sanlam, discusses the opportunities available to you, to build a tax-efficient investment portfolio with the help of a qualified financial adviser.

“Tax is something you need to consider when looking at investment returns. When you save on a discretionary basis, you could be taxed on interest, dividends and any capital gains. The good news is that there are some tax-efficient investment opportunities where you pay less tax or none at all, depending on how much you invest and how you invest it,” says Ryno.

Tax-Free Savings Accounts

If you are a South African resident with a tax reference number and a local bank account, you qualify to save in a Tax-Free Savings Account (TFSA). The maximum contribution limit is currently R36 000 for any given tax year or R500 000 over the investor’s lifetime.

TFSAs are a smart way to save, as you don’t pay any tax on the interest, dividends or capital gains. However, if you exceed the prescribed annual and lifetime contribution limits the excess amount will be taxed at up to 40%.

Retirement funds

A retirement fund is the most affordable way to save for retirement, and you can contribute up to 27.5% of your taxable earnings (that is, up to R350 000 a year) to a retirement product.
“All the returns that you earn within your retirement fund are tax free – there is no tax on dividends or capital gains. If you overcontribute to a retirement fund (i.e. contributing more than 27.5% of your taxable earnings in any given tax year) you still benefit.

When you take your pension, either in the form of a lump sum or annuity income, the tax may be reduced because of the excess contributions you made,” adds Ryno.

Once you reach the age of 55 you can withdraw some or all of your retirement annuities (if you have more than one). Up to one-third of the value may be taken at retirement, and the first R550 000 is taxed at 0%.

Endowment policies

“An endowment may be more suitable for you if you have a high tax rate, as it may be taxed at a lower rate than your personal tax rate. While estate duty is applicable, there are no executor’s fees on the policy,” says Ryno.

Provided you are within the appropriate tax bracket, you can personally invest in an endowment policy, or do so via a trust. A 30% flat tax rate applies. With endowment policies you also pay capital gains tax, but the effective tax rate is 12% instead of the 18% that you might pay in your personal capacity.

The freedom, flexibility and choice to invest in the widest range of funds, all in one place.

With Glacier’s investment platform, you have the freedom, flexibility and choice to invest in the widest range of funds, all in one place. This means, no matter what life stage you are at, you have easy access to leading local and international funds.

Speak to your financial adviser about financial solutions from Glacier by Sanlam.

Glacier Financial Solutions (Pty) Ltd is a Licensed Financial Services Provider.
Sanlam Life Insurance Ltd is a Licensed Life Insurer and Financial Services Provider and a Registered Credit Provider (NCRCP43).

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