Maximise your tax savings by taking these actions before tax year-end.

There are several ways to save on taxes when it comes to your investments and expenses. Make the most of your benefits before the 2022 tax year ends on 28 February. 

Transactions to consider before tax year-end to make the most of the available tax savings

While it is true that tax can eat away your savings over time, the good news is that there are several tax-savings options at your disposal that can help minimise your tax liabilities.

Here are three examples of how you can get the most out of your tax savings. If any of these apply to you, act hastily. 

1. Contribute the maximum amount to the available tax-efficient investment options.

Tax-efficient investments are investments that attract minimal taxes, giving you more money back in your pocket. Investing in a tax-efficient way can have a great impact on your long-term outcomes. Retirement annuities (RAs) and tax-free investments (TFIs) are both very effective to minimise your tax liability and getting the most out of your savings. The summary below explains the main tax benefits and features of RAs and TFIs.

How do RAs and TFIs differ?

• Retirement annuities
  • Purpose
    An RA is specifically designed for retirement planning, which is why you generally can't access your money before age 55.
  • Key features and taxes 
    • With an RA you pay less tax now, because your contributions (up to certain limits) can be claimed as an income tax deduction.
    • When you access your money, lump sums up to certain limits are tax-free, but after that you must pay tax.
    • Access to your money and investment choice is restricted.
       
• Tax-free investment
  • Purpose
    A TFI is a low-cost, flexible tool to supplement your long-term savings, including your retirement savings.
  • Key features and taxes
    • There are yearly and lifetime limits to how much you can contribute.
    • With TFIs you don't pay any tax, unless you contribute more than the allowed limits.
    • You can access your money within 48 hours - no restrictions or penalties.
    • You have access to more investment options.

What's the same?

All income and growth you earn while you are invested in both RAs and TFIs are tax-free.

If you don’t have any of these investments in your investment portfolio, now is a good time to consider at least one, or both. While it is generally best to have both, your choice will depend on your circumstances and needs, which is why personal advice is so important.

If you are already investing in one or both, check whether you have made the most of the available tax savings for the current tax year as it relates to different investments, namely:

• invest up to R36,000 in a TFI tax-free; and
• up to 27,5% of your total taxable income (capped at R350,000) invested in your RA is tax deductible. (This also applies to pension and provident funds.)

The South African Revenue Services (SARS) has implemented a convenient lump sum calculation tool on eFiling. You can use it to determine your estimated tax liability on retirement fund lump sums and severance benefits (eg if you have been retrenched). You can also use the calculation tool to obtain tax directives issued to you in the past. Once you have logged in, the calculation tool will appear in the bar of icons on the right-hand side of the eFiling homepage.

2. Make a donation to a loved one or charity

Donations up to R100,000 are exempt from donations tax. One must remember that a donation does not necessarily have to be an amount of money; it can also be a physical asset or a gift, such as property. Donations between spouses are not subject to donations tax.

A charitable donation to an approved public benefit organisation (PBO) is tax-deductible up to a limit of 10% of your taxable income. This tax deduction is, however, not automatic – to claim the deduction, you must submit the proof of the donation, ie a Section 18A certificate from the PBO, to SARS. (New legislation may soon come into effect, which will enable SARS to prepopulate your eFiling tax return with information about any charitable donations.)

3. Deduct your work-related travel costs

If you are receiving a travel allowance from your employer and want to claim a deduction for this tax year, your logbook must include your odometer reading up until the last day of February. However, you cannot claim for travel between your home and place of work, since SARS views this as private travel.

Expert, personal advice can help you make the most of these tax benefits in a way appropriate to your circumstances.

To make an informed decision about your tax savings and any tax-efficient investments, it is important to get expert advice. As a globally integrated advice-led business, we can give you advice on the most appropriate actions to support your overall wealth management plan. This is especially important in the context of tax-efficient investment options, where you have to decide how much to invest, and you may have to choose underlying investment options. We can also assist you with submitting your tax return via our colleagues at Nedgroup Trust. Click here for our tax fees schedule.

Want to know more ?

• Contact your wealth banker.
• If you want to find out more about how we can help you maximise your tax savings, contact us on 0800 111 263 or complete an online contact form.