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How to make Sarsa pay back the money

December in December came and went, and I was lucky I could spend some time with my family on the shore. So, with long forgotten feasts, it's important to allocate some time to the budget for the future and, hopefully, have enough money for another relaxing holiday holiday at the end of 2019.

In these politically and economically unstable times, with opposition parties in Parliament demanding that former President Jacob Zuma – among other things – "pay back", you can save some money by leveraging some of the tax relief offered by the South African Revenue Service (Sars). Getting Sarsa to "return my money," the victory is double: you and I can increase our savings and pay a little less tax.

Like you, I pay my taxes diligently, though sometimes I say a few whores. However, when it is reasonable to save some tax or reduce the tax account or denying total taxable income, I consider it a victory. Any amount you can invest increases in the long run, so if you can only add an additional R200 per month, do so. Then you will have more money than you would have, doing nothing.

There are investment products that offer tax relief, so Sars can really get your money back.

Warning Alert: I have been involved in asset management for 16 years and I have found that investing in tax relief alone will lead to disappointment. So before I go into the details of the investment offer, let me say that you must always consider the merits of the investment product yourself and only then assess the tax benefits if there is one.

Safe Deposit Accounts (TFSA)

The reason for the introduction of TFSA was to encourage population savings. This practice can reduce the vulnerability of some households facing unexpected costs, which leads to debt increases.

Increasing household savings contributes to increasing total savings in economy, financing larger investments for fixed purposes and promoting growth prospects.

TFSA provides tax incentives so that the overall growth of savings, regardless of source – income, capital or dividends – is exempt from tax, and subsequent withdrawal is tax-free.

The product offers a wide range of investment options ranging from local to offshore capital. The annual contribution limit is R33 000, with a lifetime limit of 500,000 Rn. However, it is subject to the payment of property tax to death.

Entering earlier is better when it comes to launching TFSA, as long-term investment will benefit from the complex impact of unbroken growth.

Retirement Anuities (RA)

The second investment product for tax savings is RA. RAs have received more than their large part of the bad print. But this is unjustified for related RAs, which can add a great value to your investment portfolio.

RA is simply said, an individual retirement fund – which can be kept with the employer fund – that allows people who are not part of a group scheme or who want extra savings to enjoy the benefits of retirement. fund.

From the point of view of tax relief, these contributions are tax deductible to less than 350,000 RB a year, or 27.5% of the higher remuneration or taxable income, including any taxable capital gain, but before deduction for donations.

If you can afford a contribution, say, 50,000 Rn per year and have an average tax rate of 30%, you will save R15,000 annually in taxes. You can contribute R50 000, but physically invest R65 000 if you reinvest a tax return from the RA contribution.

All growth, regardless of source – income, capital or dividends – is exempt from tax. There is also no duty on property or executive death penalty. However, in the sense of the Guidelines for Creditworthiness Investment, up to 75% may be invested in equity and up to 30% in the sea.

Many financial commentators say that limited offshore exposure denies all the tax benefits of this product. But in my opinion, these off-shore investments, as well as any other investment, have to do extremely well in order to make up for the tax deduction on your contributions and growth without tax.

The other warning from such commentators is that you are taxing the income you earn from RA after you have withdrawn from the product and therefore would be better in stock stocks where you only pay the CGT and the dividend tax on the deduction, which is lower than the marginal tax rate on income tax. I want to differentiate again. If you look at the difference in value, for example, the stock portfolio and RA for 25 years – considering the deduction of the contribution and its reinvestment as well as the growth without tax – it (save) more than compensating the fee after retirement.

I hope that after reading this you will be obliged to take RA if you do not already have it. However, it is important to have a balance of discretionary and non-contingent savings in your portfolio so that you can create different tax profiles and liquidity profiles.

Section 12J Investments

Investments in Section 12J existed since 2009 when the South African government introduced amendments to the Income Tax Act to stimulate the private sector and the economy.

These changes introduced tax incentives for investors – individuals, foundations or small business corporations – through tax deductible investments in risk capital companies of Section 12J. Companies in Section 12J must be licensed by the Financial Sector Management Board (former Financial Services Committee) and registered with Sars.

While Contributions to Investment in Section 12J are beneficial to high-income people, most of the sector's support comes from investors who want to reduce the impact of CGT.

Undoubtedly, this is the category of investment you need to carefully look at the underlying investment, investment strategy and issuer compliance before you get too excited about potential tax savings.

From the point of view of tax relief you can pay unlimited contributions that can be deducted from taxable income. Do not contribute too much, because the contribution is deducted before the amount of RA in the tax calculation and you may not get the full tax benefit of the RA contribution. You have to be invested for at least five years, otherwise your savings will be billed to Sars. At exit, your basic cost for determining CGT will be taken as zero.

Whether I pay less taxes (while earning the same income) or getting tax refunds, I have more money than I would do anything. By the end of February you have to invest your investments so start right now – there's no time to waste money making!

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