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Make sure you apply for your tax-free savings account

by , 02 March 2015

You can now apply for your own tax-free savings account.

The government introduced the scheme to help incentivise South Africans to save. You can now save R30,000 a year, tax-free.

And the accounts aren't just limited to cash. You can use them to invest in unit trusts and other investment products.

Let's take a closer look…

Tax-free savings accounts came into effect yesterday

You can apply for your tax-free savings account with one of the many financial providers in South Africa. Different institutions might have slightly different offerings.

Here’s how a tax-free savings account works:

  • You can invest up to R30,000 a year (you’ll pay tax on any additional amount over that).
  • You’re limited to paying in R500,000 in your lifetime.
  • Any interest or capital gains from your savings account is also free of tax.
  • You can invest in more than one account, but you’re still limited to R30,000 every tax year.

How to use your tax-free savings account

As well as putting cash into your tax-free savings account, you can use it to invest. You can invest in certain types of unit trusts, government retail bonds and a whole host of other investment products.

But you can’t use your account to invest in products that charge performance fees, are high risk or lack diversification.

And as long as you keep your cash and investments within the tax-free savings account, you’re not liable to pay tax on gains. This means any dividends, interest and capital gains are tax-free too.

You can use your savings account as a long-term savings account. You could think about using the funds as part of your retirement savings goals or other long-term goal.

All the major financial institutions have their offerings ready for their tax-free savings accounts. Start looking now and open an account. And ensure you make the most of your annual allowance.

So there you have it, make sure you apply for your tax-free savings account.

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Make sure you apply for your tax-free savings account
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