It is that time of year again, tax year-end is on its way. 2021 tax year runs from 1 March 2020 to end February 2021.
This is a friendly reminder to make your additional contributions to your Retirement Annuity’s and Tax Free-Savings Investments if you wish to maximise your tax benefit for this tax-year. To ensure adequate processing time, please would you submit your instructions comfortably before the last day of February 2021. To ensure that you meet the cut-off date the 19th of February is a safe submission-date for your instructions. This is not a hard rule and instructions up until the 28th of February will be accepted.
If you would like to learn more about the tax benefits on these products, or wish to start a new investment please contact your financial adviser or email us directly on clientservices@fairtreeinvest.com
MORE ON TAX & THESE PRODUCTS…
A TAX FREE SAVINGS PLAN
Tax Free Savings plans are a simple and tax efficient savings solution that provides returns that are completely tax free. Tax-Free contributions are limited to up to R36 000.00 per year, this would mean a maximum monthly debit order of R3 000 per month and up to R500,000.00 over your lifetime. Any amounts contributed which are over these limits will be taxed at 40% tax payable by the investor. With taxed structures, you have unlimited contributions and tax would be paid on growth, interest earned and dividends reinvested.
Who is Eligible for a Tax-Free Savings Plan?
Individual residents in South Africa are eligible to invest in this product.
Withdrawing from Tax Free Savings Plan
There is no minimum investment term, this means you can access your investment to withdraw at any point. The amount you withdraw is also not limited and all withdrawals are tax-free. An important thing to note is that whether you withdraw or not, the maximum contribution to this product is R500,000 for your lifetime. For example, if you contributed R100,000 and you withdraw R50 000, the amount contributed in your lifetime stays R100,000. It does not decrease each time you withdraw funds. The funds will generally be available three business days after you request the withdrawal, but it depends on who you are invested with as a MANCO/LISP.
A RETIREMENT ANNUITY
The Retirement Annuity Plan provides investors with a tax-efficient way to save for their retirement and preserve benefits for retirement. Any natural person (not legal entities) can invest in this product by contributing after they receive their salary voluntarily or before they receive their salary through their employer (compulsory). You can also transfer Retirement Annuities across investment companies through a Section 14 transfer.
Tax and Retirement Annuities
Retirement Annuities have great tax benefits because contributions made to retirement annuities are tax deductible. These contributions amounts are tax deductible to a pension fund, provident fund or retirement annuity limited to 27.5% of the greater of remuneration or taxable income. This is limited to a maximum of R350,000 per annum. Any excess contributions are carried forward. Amounts contributed by an employer are taxed as fringe benefits and classified as being contributed by the member. There are different stages an investor could pay tax on Retirement Annuity withdrawals, taxation prior to retirement and taxation at retirement.
Tax on investment growth for Retirement Annuities
In Retirement Annuities no income tax, capital gains tax or dividend withholding tax is levied within the fund, during the investment period.
Tax at Retirement
At retirement a maximum of one third of the investment amount may be taken as a cash lump sum. This will be taxed according to lump sum benefits or severance benefits tax tables. The remainder of the Retirement Annuity must be transferred to an annuity. The remaining value that is transferred into an annuity, will not be taxed when transferred. Income tax will be applied according to income tax tables when you withdrawal periodically from the annuity in retirement.
