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3 things to do in the next 14 days to reduce your tax liability

by , 11 February 2020
3 things to do in the next 14 days to reduce your tax liability
The next two-and-a-bit weeks marks the end of the tax year. It's an important time for retirement and tax planning for most people and often neglected or left too late.

There are three things you must do before 28 February 2020...

 
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1. Maximise your retirement contribution!
 
Most people forget they can max out their retirement contributions using once off contributions. You get to contribute a maximum of 27.5% of your income (or remuneration) to an annual maximum of R350,000.
 
Often these adhoc top-ups can be done through your HR department so you don’t even have the temptation of the funds being in your bank account to spend.
 
You should also consider the costs within your retirement vehicle. Employer mandated retirement schemes are generally expensive, so evaluate if it’s better to source a lower cost solution for your top-ups.
 
Some older RA policies are very expensive with layers of fees and not much flexibility.
 
2. Use your capital gains exemption
 
Every year you get R40,000 capital gains exemption and while this seems small, over time it will allow you to adjust the base costs of your winning investments to a point you save multiples of this annual exemption in capital gains.
 
However, something most people are forgetting is the tax liability of their investments in crypto currencies (Digital assets).
 
Some people are still holding onto positions they entered at the crypto price peak, the losses on these can be used to offset against capital gains elsewhere.
 
SARS even have new codes for you to disclose CGT profits and losses as well as Income profits and losses. In certain instances, losses will be ring fenced.
 
3. Take advantage of tax breaks
 
Tax-free Savings accounts: Most people often overlook pushing money into their children’s tax-free savings accounts.
 
They don’t want to max out their lifetime contribution limit. This is misguided as you can build a portfolio of Rand hedge assets (Offshore focused ETFs) that don’t attract any taxes. This can compound over time and provide for foreign tuition if necessary.
 
S12J: The flavor of the month, Section 12J funds give you the ability to write off your full investment against taxable income in the year it is made.
 
This provides significant benefits for individuals who have already maxed out all other tax minimizing strategies and still won’t reduce or defer their tax burden. There are many articles on S12J funds on popular financial websites like MoneyWeb and Fin24 and FSPInvest.
 
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3 things to do in the next 14 days to reduce your tax liability
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