Increase in Tax Free Investment Limit Applauded

By Janice Roberts
Editor

The increase in the annual tax-free investment limits from R30 000 to R33 000 is a hugely positive development to encourage proactive saving amongst South Africans, says Nedgroup Investments.

Seugnet de Villiers, Investment Analyst at Nedgroup Investments, says the 10% increase in the maximum allocation allowed to be invested in tax-free investments will provide further incentive for South Africans to take advantage of the savings opportunities available via tax-free investments.

“While the growth on tax-free contributions over the past two years, since they were introduced has been very encouraging, we found that there are still many investors who believe that the contribution limits of R30 000 per year and R500 000 per lifetime do not make it worth their while. These new limits will almost certainly have an immediate impact on the uptake of these investments and we applaud the move by government,” she says.

De Villiers says tax-free investments have certainly taken off as the ‘no-brainer’ investment of choice in South Africa in the past two years, with over 260 000 new tax-free investments being opened in the first tax year alone according to the Intellidex Survey1. “At Nedgroup Investments, the total contributions to tax-free investments had already more than doubled by January in the second tax year that they have been around for – not including the flows for February which is always one of the most popular months for tax-free investing. We look forward to seeing the impact of the increased limits as the new tax year kicks off on 1 March.”

De Villiers says all South Africans stand to gain by considering tax-free investments. She highlights the following benefits that make the investment a ‘no brainer’.

“In short, zero percent tax. The growth on your tax-free investment portfolio is boosted throughout your investment time frame by being exposed to zero percent tax on dividends earned (instead of 20%), zero percent tax on interest/income earned (instead of your marginal tax rate on interest earned above the annual interest exemption, which has remained unchanged for the new tax-year) and zero percent tax on capital gains realised at withdrawal (instead of up to 18% on gains above R40 000). It’s an excellent incentive to encourage a much needed savings culture in South Africa,” she says.