Know how to score on tax
Consumers need to become more tax savvy to ease the impact of the recent value-added tax (VAT) increase from 14% to 15%.
While the deadline for filing your income tax returns is only towards the end of 2018, getting into good tax habits early on is a must to make the most of concessions and benefits. Knowing what you can claim for will help you to prepare accordingly – such as keeping the correct slips or invoices and knowing the tax-free limits on savings vehicles.
Understanding how your investments are taxed is critical. Government incentivises saving by building in tax benefits to both medium- and longer-term savings vehicles.
Consider how these solutions are taxed, as they can ultimately help you achieve your financial goals – specifically, how you’ll live after you retire.
In the short- to medium term, it’s important to look at savings vehicles with more flexibility – but which are still taxed efficiently.
Tax-free savings accounts (TFSAs) are a perfect example, as they offer tax-free growth on capital and no tax on withdrawals – which gives you flexibility. However, limits apply so speak with a professional financial advisor to ensure you stay within the taxfree limits. You’re allowed to contribute up to R33 000 per person per year, or up to R500 000 over a lifetime.
In long-term savings, specifically for retirement, one of the most tax-efficient vehicles is a retirement annuity (RA). While RAs offer limited liquidity, the tax concessions on contributions are a huge benefit.
You can save up to 27.5% of the greater of remuneration or taxable income – capped at R350 000 per year – on contributions made to pension, provident and RA funds. Government offers a cashback via a tax refund at the end of the tax year. In addition, growth on your contributions while in the fund isn’t taxed. Consult a financial adviser on the tax implications relevant to regular investments.
While many people make their last-minute RA contributions at the beginning of the year, it’s important to keep track of the thresholds by incorporating them into a broader financial plan.
Moneyweb
Everyone should be concerned about something happening to them, their families or lifestyle. Essentially life insurance, disability cover and serious illness cover are about protecting you and your family if you can no longer earn an income or if you incur a major life impact, temporarily or permanently.
“Life cover should do nothing more than settle debt and provide the difference between your current accumulated capital and the capital sum required to purchase a sustainable, escalating income for the family’s future needs,” says Harvard House’s Robin Gibson.
Know how much you need
“Buy the cover you actually need and spend time determining