As of 1 March 2015, Tax Free Savings Accounts became available to South Africans.  Utilising these accounts could result in considerable benefits for long-term investors by earning “tax free” income and capital gains.

Further to our March 2015 Newsletter, we indicated that we had various concerns regarding the technical details that we were waiting for further response on.  We are pleased to advise that our Investment Committee has researched and put into place an independent offering for investors wishing to make use of these investment vehicles.  Please do not hesitate to contact us for more information.

BENEFITS:

• All capital gains tax, income tax, interest and dividends you earn within the account is completely tax free.
• You may nominate one or more beneficiaries. When you pass away, your investment can be paid to your beneficiaries immediately and there are no executor fees. The value of the investment will however be included in the estate for the calculation of estate duty.
• Fees are identical to investing in a Unit Trust. There are no additional costs and no performance charges.
• Subject to the following limits, contributions are flexible. You can set up a monthly debit order or add lump sums on an ad hoc basis. The monthly contributions can be started, stopped and changed at any time without fees or penalties.

INVESTMENT LIMITS

 Important points to note regarding these accounts:

• The maximum investment limits are for all tax-free savings accounts you may have across different product providers.  Any portion of your un-used annual limit may not be carried forward to the next tax year.
• There is a 40% tax penalty on any amount you invest, in excess of the maximum, across product providers.
• Although withdrawals are allowed, any amount taken from these accounts will not increase the lifetime limit of R 500,000.  It is therefore advisable to utilise these accounts for long term investment.
• The owner must be a natural person (Not available to legal entities such as Trusts, Companies etc).
• The account must be in the name of the contributor, there are no joint accounts.
• If a Beneficiary for proceeds dies before the Policyholder, the deceased beneficiary’s share will be divided equally between the remaining beneficiaries (if any).

If you nominate a beneficiary other than your spouse and you are married in community of property, then your spouse’s written consent is required as all assets fall part of your joint estate.