Page 26 - Waterfall_Issue 2_Feb_2022

Waterfall News

tax effIcIeNcY at

Your fINgertIps

Tax-efficient products to meet your retirement and savings needs

By Jan van der Merwe, Head of Actuarial and Product, PSG Wealth

a fter another unexpected and eventful year, the festivities have officially

ended, bringing us back to square one – outlining future goals,
saving plans etc. For those who were fortunate enough to receive
additional income in the form of a bonus or 13th cheque – now is
the time to consider saving a portion of your income in a tax-efficient manner.
This article provides insight into products that are suitable for maximising the
tax benefits available, as we approach the tax year-end on 28 February 2022.

the role of ras and tfsas in retirement planning
Retirement Annuity (RA) products have been around for many years. They
are specifically designed as a vehicle focused on saving for retirement. Tax-
Free Savings Accounts (TFSAs) were introduced in 2015, and though not
designed specifically for retirement, they do provide unique rules around tax
treatment, which can be leveraged to supplement retirement savings. While
both products offer tax incentives to save, and benefits when creating a
long-term financial plan, appropriate product choices will depend on
your individual circumstances. A combination of the two may also
be a suitable way to achieve desired outcomes by leveraging the
benefits of each to achieve your retirement and savings goals.

KeY coNsIDeratIoNs WheN BaLaNcINg
INVestMeNts BetWeeN ras aND tfsas

tax on investment income
Both products offer investors a tax advantage
as they attract no tax on interest, dividends and
capital gains while funds are invested.

Note that even without these tax treatments, SARS allows
certain annual tax exemptions on investments outside of
these products, namely a R23 800 annual interest income
allowance and a R40 000 annual capital gains tax exemption.

So, if you receive less than R23 800 in interest
income or less than R40 000 of capital growth, you
will not owe any tax on your investments. However,
you will still be charged dividends tax of 20% on
all shares that have paid you a dividend.

contributions
There are no contribution limits for a RA. You can
contribute and deduct up to 27.5% (capped at
R350 000) of your total annual taxable income in any

24 Waterfall Issue 2 2022