Tax

Retirement Planning
640 417 Maysure Financial Services

The Tax Benefits Of Sound Retirement Planning

Retirement planning is an essential part of securing your financial future, but it can also create significant tax savings in South Africa. With a range of retirement funds available, it’s important to understand the advantages of each type of fund, and how to maximise your tax savings through careful planning.

South Africa Has Three Types Of Retirement Funds

When it comes to retirement planning in South Africa, there are three main types of funds to choose from: Retirement Annuities (RAs), Pension Funds, and Provident Funds. Each type of fund offers different tax advantages, and it’s important to understand the annual contribution limits and tax deductions associated with each. 

Retirement Annuities

Retirement Annuities (RAs) are a popular choice for retirement planning in South Africa. Contributions to an RA are tax-deductible, up to a maximum of 27.5% of your taxable income or R350,000, whichever is the lesser. This means that if you contribute the maximum amount, you could reduce your taxable income by up to R97,250. RAs also offer the added benefit of being able to access your savings before the age of 55 in certain situations such as permanent disability or terminal illness.

Pension Funds

Pension Funds are another popular option for retirement planning in South Africa. Contributions to a Pension Fund are also tax-deductible, up to a maximum of 15% of your taxable income or R350,000, whichever is the lesser. This means that if you contribute the maximum amount, you could reduce your taxable income by up to R52,500. Pension Funds also offer the added benefit of being able to access your savings at the age of 55, unlike RAs which access is only permitted under specific conditions.

Provident Funds

Provident Funds are a third option for retirement planning in South Africa. Contributions to a Provident Fund are tax-deductible, up to a maximum of 7.5% of your taxable income or R350,000, whichever is the lesser. This means that if you contribute the maximum amount, you could reduce your taxable income by up to R26,250. One of the main advantages of Provident Funds is that you can access your savings at any time, unlike RAs and Pension Funds which have specific conditions and age restrictions.

It’s important to note that the maximum contributions mentioned above are per annum, so it’s essential to plan your contributions carefully to make the most of the tax advantages available to you. Also, it’s crucial to note that these are the limits for the 2021 tax year and they might change in the future.

Maximising Tax Savings Through Retirement Planning

To maximise your tax savings through retirement planning, it’s a good idea to take advantage of the annual contribution limits and tax deductions associated with each type of fund. For example, if you’re able to contribute the maximum amount to both an RA and a Pension Fund, you could reduce your taxable income by up to R149,750. Additionally, you should ensure that you are contributing to the right type of retirement fund that suits your specific financial situation and retirement goals.

Tax Implications Of Withdrawing Your Retirement Savings Early

It’s also worth considering the different tax implications of each type of fund when you start withdrawing your retirement savings. For example, withdrawals from an RA are taxed as income, while withdrawals from a Pension Fund are taxed as a lump sum. So, it’s essential to understand the specific tax implications of each option before making a decision. The preservation of your retirement savings is essential so that you can live a comfortable life later. 

If you are younger than 55 and you withdraw from your retirement fund, you will be subject to penalties, taxes, and charges. Furthermore, if you withdraw your savings before you reach retirement age, you will lose out on the tax benefits.

Conclusion

Retirement planning is a crucial aspect of securing your financial future, and it can also offer significant tax savings in South Africa. However, with a range of retirement funds available, it can be overwhelming to understand the tax advantages of each type of fund and how to maximise your tax savings through careful planning. It’s always a good idea to consult your financial advisor, tax professional, or attorney to understand the specific tax implications of each option before making a final decision.

At Maysure Financial Services, we understand that retirement planning can be a daunting task, and that’s why we’re here to guide you in creating the best possible solution for your lifestyle. We work with you to understand your unique financial situation, and retirement goals, and help you navigate the different options available. 

We are here to help you make informed decisions, and ensure that you are on track to secure your financial future while maximising your tax savings.

Remember, retirement planning is a long-term process, and it’s essential to start early to give your savings time to grow and to take advantage of the tax benefits available to you. With the help of Maysure Financial Services, you can feel confident that you are on the right path to securing your financial future and enjoying significant tax savings in the process.

—

If you need a little guidance, feel free to get in touch with us.

+27 11 839 2302

info@maysure.za.com

Family together and laughing
640 417 Maysure Financial Services

TRUSTS: EFFECTIVE ESTATE PLANNING & TAX-SAVING MECHANISMS

In order to effectively organise your financial security and legacy, you need to start by establishing your estate planning questions. These questions often touch on the complex topic of tax and trusts. To bring these concepts together takes a certain skill and expert understanding. This is where estate planning professionals are crucial.

We’ve put together a guide of some of the fundamentals when it comes to the relationship between trusts, estate planning, and tax considerations. Keep reading to find out if trusts are the right vehicle for you and your family. 

WHAT ARE TRUSTS?

Lady holding pen

A trust can be defined as a tripartite legal relationship that exists between a founder, a beneficiary, and a trustee.

The trust is created by the founder, who places his or her assets in the trust, and then administrative control is given to the trustee. This is often done for the benefit of the beneficiary.

Trusts can provide advantages in several areas, such as:

  • Estate planning and management
  • Asset protection and preservation
  • Maximisation of tax-saving
  • Flexibility and confidentiality

Trusts can also operate independently or form part of a broader financial strategy. They are often used as an instrument to allow for the preservation and transfer of assets between generations. They can also be used as a means to manage and protect your assets, after or during your lifetime.

WHAT ARE THE TYPES, USES, & BENEFITS OF TRUSTS?

Two people discussing finances

In South Africa, there are many different types of trusts available. For our purposes, we will be discussing living (inter vivos) trusts and testamentary trusts. Each type has specific uses and benefits.

A living trust, or family trust:

  • Is established by the founder, or family, during their lifetime
  • Becomes effective at the time of its registration
  • Carries with it the benefit of enabling the wealth-building of its beneficiaries during the lifetime of the founder
  • May be used as a means to protect assets

A testamentary trust:

  • Is created by the terms stipulated within the will of its founder
  • Only comes into effect after the death of its founder
  • Offers the benefit of protecting both minors and vulnerable family members
  • It does not safeguard assets during the founder’s lifetime

There are several questions you can ask yourself to assist you with choosing a trust type.

Do you want peace of mind about the management of your children’s inheritance, and what may be left behind when you are gone?

Or, do you want to protect your current assets and build a lasting stream of growth for your family?

Contact us so we can help you find the right trust for you and your family.

TRUSTS FOR ESTATE PLANNING

Woman in discussion with couple

Setting up a trust, as opposed to a will, is an effective estate planning measure. It can result in faster transfer processes, lower administrative costs, and tax reliefs.

Because the growth of the trust does not directly form part of the estate, and instead belongs to the trust itself, the trust is afforded protection against estate duties (unlike with a will). This will also effectively protect the assets from creditors in the event that your estate goes insolvent.

In addition, it can also be used as a means to specify the type of wealth accumulation that you envisioned for your family assets.

For example, instead of providing a lump sum of capital, or splitting up the funds amongst the beneficiaries, the fund can remain unified, continue to grow, and subsequently be used as a source of consistent income.

ENDOWMENTS AS A TAX SOLUTION

Man putting money in a jar

Trusts are not without their drawbacks though. Two of the major pitfalls in establishing a trust in South Africa include:

  1. Heavy tax burdens on income that is kept at the trust-level (between 36-45%)
  2. The inability of the trust, as an entity, to directly invest off-shore

However, there are effective tax-saving mechanisms that can exist within a trust to counter these disadvantages.

For example: if a trust were to invest in an endowment fund, it would reduce its income tax to a flat rate of 30% and their capital gains tax (CGT) to as low as 12%.

An endowment fund also allows for the creation of offshore investment opportunities. This can not only diversify your investment portfolio, but also act as an effective tax-saving mechanism.

IS A TRUST THE RIGHT MOVE FOR YOU?

There are conditions under which it would be beneficial to set up a trust:

  • If your assets exceed 3.5m
  • When you have minor children or vulnerable family members
  • If you want to retain your family’s wealth well into the future

Before you make your decision, it is vital to know that the creation and management of a trust comes with more administrative requirements than that of a standard investment account.

It is a good idea to make yourself aware of these processes and costs before you make your decision. If your top priority is to save on taxes, then a tax-free investment might be a better option for you.

Start planning your future, today. Contact us on the details below.

+27 11 839 2302

info@maysure.za.com

couple going through documents
640 417 Maysure Financial Services

Tax Law Changes: Effects On Estate Planning

Within the South African tax sphere, changes are continuously made to ensure fair and balanced taxed households.

Every business owner, employee, and regular individual must be in the know regarding tax laws implemented in South Africa. We at Maysure Financial Services have a firm grasp on estate administration and the relevant tax laws. Keep reading to find out more about changes to tax and the related effects on your estate. 

What are the current changes to tax law?

Man writing in book

Proposal of exit tax on retirement interests (for now)

You may wonder what ‘exit tax’ means’? In simple terms, it is the tax that is payable (when you leave the country) on either foreign fixed property, trusts, shares, or unit trusts as well as similar investments. All of this forms part of the standard process for emigration.

The proposal of introducing an exit tax was drafted last year but has since been on hold. During this “hold”, no tax will be charged on the assets sold. As a result, now is potentially a good time to move for those looking to leave.

Conversations are still ongoing. as the proposal will be re-examined later this year. Here at Maysure Financial Services, we assist you to prepare for the future of your estate and retirement by planning according to what regulations and legislation are in place.

Use of retirement interest to obtain annuities

In the past, an individual could not acquire annuities upon their retirement. However, now, because of the amendment to the Income Tax Act, individuals can choose from different types of annuities. Retirement annuities are an excellent vehicle of income for retirees.

Estate duty

Estate duty should not be an unfamiliar term. Well, that is if you have written a will and made plans for your estate upon your death. 

There are no changes to the tax regarding this particular aspect of estate planning. But, it must be noted once a deceased person’s assets have been filed. This is essential because it is the ultimate duty of the executor to ensure the duty levied on the property of the deceased is paid.

Estate duty is charged on movable or immovable properties/assets of a deceased person. Among other responsibilities, the executor needs to know the value of these assets. 

At Maysure Financial Services, we offer estate administration services to ensure everything is distributed according to your final wishes and loved ones’ needs. 

Capital and income gains tax

Family laying on the ground

When you pass away, your tax expense doesn’t leave earth with you. SARS has the right to claim what is owed to them before any finalisation of an estate. These include income tax, capital gains tax, donations tax, and any other form of tax that may be applicable.

Capital gains tax refers to a tax that is not separate but forms part of income tax. A capital gain occurs when you dispose of an asset for proceeds that exceed its base cost. This tax is normally for companies, individuals, or trusts.

A resident of South Africa, as stated in the Income Tax Act 58 of 1962, is responsible for capital gain tax on assets that are located both in and outside South Africa.

Whistles a  non-resident is responsible for capital gain tax only on immovable property in South Africa or assets of a “permanent establishment”  in South Africa. 

Couple talking to estate administration consultant

How all of these tax laws affect your estate

Drafting an estate plan shows your loved ones that you care for them and understand the importance of planning. Tax laws make up an important part of estate planning which may affect your estate in the unfortunate but inevitable event of your death. 

In many ill-fated cases, families are left in devastating financial and emotional situations because of hefty tax penalties and red tape. A financial professional can help you to navigate the intricate web of tax regulations and stipulations. 

Changes are inevitable. It is how you plan around them that matters.

Man sifting through paperwork

If you need assistance in understanding Acts and Laws concerning your estate, don’t hesitate to call us.

+27 11 839 2302

info@maysure.za.com

Maysure Financial Services is a registered financial services provider. FSP 15173

Tax deductibles
640 400 Maysure Financial Services

Optimising Tax Deductibles: Natural Persons Tax

With the taxation season knocking at our door once again, you may have that heavy feeling descending on your shoulders. As much as you may dislike doing it, failing to file your tax returns can get you into serious trouble. The law does not make exceptions for being overwhelmed or stressed.

It’s always worthwhile to get your financial affairs in order. Who knows? Maybe the South African Revenue Services (SARS) owes you.

The point is you can make it through your tax season and capitalise on certain benefits. Here is a guide on how to optimise your tax deductibles.

Overview on natural person’s taxes

Tax time on scrabble blocks with clock in the middle

Taxes that are levied by the national government of South Africa under the Income Tax Act 58 of 1962 are as follows:

  • Natural persons tax (also known as normal tax) income tax

The below taxes form part of a natural person’s tax:

  • PAYE
  • Provisional tax
  • Withholding tax on royalties
  • Donations tax
  • Dividends tax

For this post, we will be focusing on tax returns and deductions. If you would like to know more about the various types of tax laws, read this guide on taxation in South Africa.

Deductibles to remember

Big TAX on chalk board with lady on computer

If you want to optimise your tax deductibles here are the crucial points to keep in mind for your tax return this year.

Contribution to a pension, provident, and retirement annuity fund

Investing in your future will always has a beneficial return. This does not only relate to your retirement, but also to your monthly contributions into pension, provident and retirement annuity funds.

Yes, these contributions are tax deductible. Although these are subject to an annual limit of R350 000 and a maximum of 27.5% of your gross earnings or taxable income (whichever is higher) within a tax year.

Medical aid contributors

Medical aids in South Africa can be costly, which makes receiving back from the medical insurance industry a relief. Here is the good news…

If you belong to a medical aid scheme, as the primary member of the medical aid you qualify for a medical tax credit at the value of R310. Not only do you qualify for it, but your first dependent receives the same tax credit value.

There is also a further credit of R209 for each member that is registered on your medical aid.

Donations for registered Public Benefit Organisations (PBO)

A group of people talking about the tax season

If you donate a sum of 10% of your taxable income to a Public Benefit Organisation (PBO), you can also claim a tax deduction.

However, it is not as simple as just claiming back tax. The PBO must be registered with SARS and grant a valid tax certificate for your contribution.

Travel allowances

If your employer pays you travel allowances, you can receive returns from SARS. Ensure you keep a detailed trip logbook with the related costs. If you do not have this proof, SARS can and will reject your claim.

This is an excellent deductible to keep in mind, especially if your work requires you to spend substantial time away from your loved ones. At least you get some money back in pocket for the time away from them and the added mileage.

Commission-related expenses

two people in business talking about tax

If you are in an industry where you earn commission on top of the basic salary, you may also be entitled to a deductible. This commission-based income is known as 3606 on the IRP5 form.

If the amount makes up for more than 50% of your total income, SARS will see that all costs incurred from making a living from the commission are deducted. Bear in mind that you will need to have evidence of this for SARS.

Business expenses (self-employed)

Self-employed business expenses are deductibles that talk to independent contractors, freelancers, and sole proprietors. If you have stationery, a phone or even employee costs, SARS will allow you to deduct these expenses related to making your income.

You must be thorough when it comes to keeping invoices and records of these expenses. At the end of the day, you want to see some money in your pocket and it will pay off if you follow procedures.

Tax-free investment accounts

Couple talking to a professional about tax

The government introduced tax-free savings accounts to encourage South Africans to save more money. With the tax-free accounts, investors can save R36 000 annually, with the lifetime limit of R500 000.

This gives you the advantage of the compounding interest dividends. You also don’t have to pay capital gains tax.

The dividends received by a person, whether you are a South African citizen or not, are normally exempted if these are South African resident companies.

Final thoughts on optimising tax deductibles

tax planning for this season

Getting the most out of your tax returns can benefit you for a lifetime. Understanding the financial system does not just benefit your pocket, It gives you the financial knowledge you need in order to work with SARS to your benefit.

If you feel you are lacking in knowledge and want to learn more, ask. Your money is a valuable asset that needs to be managed with care and consideration.

If you’re not sure where to turn, contact us at Maysure Financial Services. We will assist you to optimise your tax deductibles and continue on your road to financial freedom.

+27 11 839 2302

info@maysure.za.com

Maysure Financial Services is a registered financial services provider. FSP 15173

family-talking-about-savings
640 417 Maysure Financial Services

Family and Budgeting: Financial Anxiety Solutions

Sensitive conversations around money and family can have you running for the hills. These are not easy discussions to have. But, family and budgeting are valuable in terms of understanding the financial stages of life. 

Your relationship with money is like a committed relationship. You need to work at it to be successful. 

Perhaps we have never seen our relationship with money like that. But once we do, the question remains… What is the best way to deal with financial stresses and decrease financial anxiety in our lives?

Have a plan with your money 

family budget meeting

Assess your current financial situation. Sit with your partner and list your family expenses and income. 

Simplicity is key. By understanding what is going on internally, you can evaluate what you are spending externally. 

Install or sign up for a budgeting app to keep a record of expenditure. This will help you to assess and categorise where you need to keep spending or cut back.

Tough conversations with your partner

important conversations around money

Getting on the same page with your partner about finances cannot be overemphasised. Finances can add plenty of strain to a relationship. Often, this is unnecessary pressure.

A good starting point is not to make discussions about money seem like a punishment. Both individuals’ thoughts and ideas around money need to be valued in a financial conversation.

Start by looking at what you both want to achieve financially and of course, what you both care about the most. This can be investments, your home, children, education, or holidays and travel.

Converse with your partner about their views about money. This can help you realise differences in your histories and relationships with money. 

At times, this could be impacting your financial decisions and spending behaviour. You can then form an action plan together, for going forward with finances. 

If you have children, encourage like-minded conversations on how you are spending money on them. Some ideas to help maintain a budget include: 

  • Planning birthday celebrations
  • Accounting for holiday ventures and outings
  • Factoring in creche/school fees
  • Looking at their monthly essentials
  • Keeping an emergency fund for illnesses or other “surprises”

Don’t spend money you don’t have: social media’s role

money and the globe

Social media marketing uses ingenious and inventive algorithms to hit us where we are most vulnerable. These platforms use ads with advanced targeting in order to play on our consumer weaknesses. 

Many of us spend money we do not have. It’s why financial literacy is such an important skill. 

We need to know how much we can afford and learn to say no.

Many people, especially in this day and age, lead a materialistic way of life. There is nothing wrong with having material goals and enjoying the finer things in life. Unless, you are living outside your financial means in doing so…

Teach children financial responsibility 

Spending habits start with the way you understand money and use it. If we do not have the knowledge and saving habits from a young age, it becomes a difficult journey when we are older.

By teaching children financial lessons, you add value to the way they think about money when they grow up. Money conversations should not just be for you and your partner. But essentially, a growing family conversation.

Children need to understand that money is earned. In this way, we shape our children’s futures by giving them a strong financial literacy foundation. 

We can do this by teaching them how to work for the things they want and need. We can tell them and show them by example how to: 

  • Plan
  • Budget
  • Acquire assets
  • Avoid debt, and 
  • Save money

Prepare for emergencies

talking about finances to the family

Life likes to throw us unexpected surprises. For example, a death of a family member, getting sick, being laid off at work, or not having a retirement plan. 

The aftermath of these unexpected emergencies can lead to serious financial strain for a family. The one thing you want to avoid during this already-emotional time is a financial storm. 

A budget should always include an emergency fund for this very reason. This avoids a spiral into debt after any life crisis.

Emergency fund savings

However, do not put all your money into an emergency fund. Be realistic. 
It may take you between six and 12 months to save a comfortable sum of money that you can use for emergencies without feeling the pinch.

Final thoughts on family and budget

money on a map

Starting small is better than not starting at all. Shedding light on bad spending habits will help you to re-evaluate what’s important in your life and better support your money goals.

The emotional and physiological strain finances can have on your health is something to consider too. Money can have a controlling effect on our lives. How you manage it as a family makes all the difference. 

Not everything that comes your way in life will make you happy. Redefining what success means to you – whether it’s a thriving family, regular holidays, a growing business, or a reputable name – will help you to keep on track with your financial and budgeting goals.

– – –
For assistance with budgeting and achieving family financial freedom, please contact our Maysure Financial Services team.

+27 11 839 2302

info@maysure.za.com

Maysure Financial Services is a registered financial services provider. FSP 15173

Tax label on clock featured image for Maysure
624 407 Maysure Financial Services

Tax Season: How to Maximise Tax Benefits

The end of the 2021 tax year, 28 February, is nearly upon us. This means it’s your last chance to take advantage of the tax benefits available to you.

They range from deferring tax payments to benefit you in the short term to optimising tax-free investments for the long term.

Let’s take a deeper look at how you can maximise your tax benefits before the end of the 2021 tax year.

Tax-Free Investment Account

Man smiling at computer

Opening a tax-free investment account is something every South African should be doing. Not only does it allow you to invest across multiple financial products, but all your returns are completely tax free!

This was introduced by the government in 2015 as a means to encourage people to save money. The investment amount is capped at a certain amount each year.

In the 2020 tax year, the cap was set at R33 000 per person. For the 2021 tax year, the cap was increased to R36 000. However, bear in mind that the lifetime limit of R500 000 per person remains.

So, if you haven’t reached your yearly investment cap, now is the time to take advantage of this tax-exempt investment opportunity. If you already have a tax-free investment account, then ensuring you’ve contributed your yearly amount is a wise move.

However, if you do not have an account, we recommend that you discuss this opportunity with your financial advisor. We can assess whether this type of long-term investment suits your current income level and debt situation, and aligns with your investment goals.

Contact us and we’ll take a look at your portfolio and advise you on the best way forward.

Retirement Funds

Blue chairs on beach facing sea

Retirement planning is an important part of the financial process. It ensures an individual’s long-term financial health, but it can also provide great tax benefits in the short term.

One such advantage involves increasing the amount you contribute to your annual retirement investment. This can ultimately decrease your tax burden and increase your tax return.

An individual is permitted to invest up to 27.5% of their taxable income into their retirement fund per year. In addition, by making these extra contributions, you decrease the overall amount of tax that you end up paying each month. You’re essentially investing in your future using pre-tax money and also reducing the amount of tax you pay to SARS.

Not only is this a part of a major saving’s incentive, but it also provides tax return benefits to you in the short term. You’ll be able to claim back more on your annual tax returns by maximising your retirement contributions.

Section 12J Investments

Man reading business newspaper

As an investor, it’s incredibly satisfying bringing in financial gains for you and your family. Investing in venture capital companies (VCCs) takes that sense of satisfaction to another level by encouraging taxpayers to invest in local businesses. The provision of tax incentives to individuals and the streamlining of the claims process has made it much easier for individuals to invest in the local economy.

SARS is now offering you the opportunity to claim a 100% tax deduction from your taxable income, provided you have invested in a VCC for five consecutive years. This began as a means to foster investment into small and medium-sized entities, which form a major part of the South African economy. Section 12J investments are a great way to support local, domestic businesses and to benefit from significant tax returns.

Make sure to discuss this with your financial adviser before making this type of financial commitment. There is a lot more to investing in a VCC than you’d expect, especially in comparison to a tax-free investment or retirement fund.

Expand Your Benefits Before 28 February

Smiling lady in blue sweater

It’s not too late to take advantage of these simple tax benefits. There’s still time to top up your tax-free investment account and your retirement fund, if you haven’t already reached your yearly cap.

It’s also never too late to begin your investing journey. There are many options available, each with their own unique tax benefits.

We are here to help you get the most from your hard-earned money while working toward your short and long-term goals. Tax incentives can provide the extra motivation you need to invest in your today and start putting away for your future.

Please do not hesitate to get in touch to find out how to make your money work for you.

+27 11 839 2302

info@maysure.za.com