Tax-‐Free
Savings
–
what’s
the
fuss
about?
I’m
sure
by
now
you
have
heard
something
about
the
big
tax-‐free
savings
buzz!
Companies
have
launched
products
left,
right
and
centre
to
align
themselves
with
the
new
legislation
that
came
out
in
March
this
year.
The
long
and
short
of
it
is
that
you
can
now
invest
tax
free
in
certain
approved
products.
No
tax
on
interest
earned,
dividends
or
capital
gains.
Sounds
fantastic
doesn’t
it?
The
pitfall
of
this
is
that
you
are
limited
to
only
contributing
up
to
R30,000
per
year
or
up
to
R500,000
over
your
lifetime.
With
current
tax
exemptions
as
they
are
(R23
800
pa
for
interest),
dividends
only
being
taxed
at
15%
and
with
a
capital
gain
allowance
of
R30,000
per
year
–
it
takes
a
large
sum
invested
to
exceed
these
exemptions.
With
the
maximum
contributions
applied,
the
only
other
way
it
can
build
up
enough
to
make
full
use
of
the
tax
benefit
is
to
be
invested
for
a
REALLY
long
time.
I’m
talking,
25
years
minimum.
Want
to
contribute
more
than
allowed?
They
smack
you
with
a
tax
rate
of
40%
of
whatever
is
over.
Realistically,
who
has
goals
that
are
that
far
away
that
are
not
retirement?
It’s
not
a
good
idea
to
substitute
your
retirement
annuity
for
this
because
those
gains
are
tax-‐free
too
and
you
have
the
huge
benefit
of
your
income
tax
deduction.
Although
yes,
you
are
taxed
once
you
retire,
I
still
wouldn’t
substitute
it.
One
of
the
reasons
being
that
you
can’t
nominate
a
beneficiary
and
the
funds
are
dealt
with
in
your
estate,
which
attract
estate
duty
and
executors
fees.
When
should
you
consider
tax-‐free
savings?
The
most
practical
way
I
can
think
of
to
make
use
of
the
new
legislation
is
it
to
be
an
investment
for
your
child.
In
this
way,
you
have
time
on
your
side.
You
could
start
the
investment
when
your
child
is
born
and
put
funds
away
for
their
future.
The
downfall
is
that
the
investment
will
need
to
be
in
your
child’s
name
and
there
would
be
nothing
legally
stopping
them
from
accessing
the
funds
before
they
should.
What
tax-‐free
product
to
invest
in?
Like
other
investment,
there
are
choices
of
what
to
invest
in.
Fixed
deposit
accounts,
unit
trusts
or
share
portfolios.
I
would
strongly
suggest
staying
away
from
fixed
deposits
as
this
is
too
conservative
for
a
long-‐term
investment
–
you
can
do
better
over
time
by
taking
on
more
risk.
Share
portfolios
are
suitable
for
the
long
term,
however,
fees
tend
to
be
higher
than
unit
trusts.
Unit
trusts
with
high
exposure
to
equities
are
probably
your
best
bet,
although
the
tax-‐free
universe
is
a
lot
smaller.
As
always
make
sure
you
do
your
homework.
I
can’t
seem
to
fathom
what
the
big
fuss
is
about.
Written
by
Beth
Orchison,
Financial
Navigator
at
Southern
Charter
E-‐Mail:
[email protected]
Originally
posted
on
little
miss
http://www.littlemisschats.com/tax-‐free-‐savings-‐whats-‐the-‐fuss-‐about/