3 Investments Products that Can Maximise Your Tax Efficiency

Taking advantage of these investment products can legitimately save tax and enhance your after-tax returns.

Travis McClure CFP®

Executive Director and Private Wealth Manager

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3 Investments Products that Can Maximise Your Tax Efficiency

Even Albert Einstein once complained that the hardest thing in the world to understand is income tax.

Many people can relate to his confusion and with the end of the tax year looming, we’ve put together some helpful articles to give you some ideas as to how you can benefit from some tax efficiencies and invest at the same time.

Taking advantage of these investment products can legitimately save tax and enhance your after-tax returns.

Einstein also said 'Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it.' So ensure you get the most out of your investments by being tax efficient and compounding these benefits.

Take advantage of a Tax-Free Savings Account

Tax-Free Savings Accounts (TFSAs) provide South African investors with a flexible way to save towards a specific goal or supplement their retirement savings. Being able to save tax-free is an attractive incentive and one which investors should consider as part of their long-term savings plan.

If you have not already done so, we encourage you to make use of your R36,000 annual contribution limit to your tax-free savings investment. Need to know more?
Save for retirement with a Retirement Annuity

A Retirement Annuity (RA) is an individual pension fund – which can be held in addition to an employer fund – that allows people who are not part of a group scheme, or want additional savings, to enjoy the benefits of investing in a retirement fund.

An RA is more than just a disciplined savings plan and it offers many advantages to individuals both pre and post-retirement. Is an RA right for you?

Already have a TFSA or RA? We recommend that you take full advantage of the tax-deductible benefits that each offer by topping them up.

How to lower your tax burden with a Section 12J investment

Section 12J (S12J) of the Income Tax Act is a tax incentive whereby investors can enjoy 100% tax relief by investing in a qualifying Section 12J venture capital company. Let’s just repeat that: the entire amount you invest is tax deductible, up to an annual limit of R2.5 million for individuals/trusts and R5 million for corporates. Can you benefit from a S12J investment?

It’s important to remember that investing only for a tax benefit is likely to lead to disappointment. So, you should first always consider the merit of an investment product itself and only thereafter assess the tax advantages, if any.

Our NFB Private Wealth Managers will partner with you for your bespoke financial planning needs, get in touch with us.