The financial year end in nearly upon us and have you taken all your tax exemptions into consideration? Contributions not reflecting in your account on 28 February 2019 will accrue to the 2019/2020 tax year and will not be backdated.
Annual donation tax exemption
The annual donations tax exemption for individuals is currently R100 000 per annum. Any natural person can make the donation, so if both you and your spouse make a donation the annual amount would be increased to R200 000. If you wish to reduce your loan account to a trust using your annual donations tax exemption, please be sure to inform your accountant, to enable them to account for the necessary paper work. Tax certificates with each donation must be submitted.
- Retirement Annuity (RA) contributions
Retirement annuity contributions made before the tax year-end may be tax-deductible within the legislative limit. Contributions to all retirement funds (Pension, Provident and Retirement Annuities) are deductible up to 27.5% of the greater of remuneration or taxable income, capped at an annual limit of R350 000.
3. Tax-Free Saving Account (TFSA) contributions
TFSAs provide South African investors with a flexible way to save towards a specific goal or supplement their retirement savings. As TFSAs are not subject to income or capital gains tax, they can be a useful instrument to grow savings over the long-term. The current annual contribution limit is R33 000 (if by debit order, then a maximum of R2750 per month) and the lifetime contribution limit is R500 000. You can withdraw from a TFSA at any time, and there is no tax on withdrawals. Remember while an RA will not form part of your estate, a TFSA will. It is generally considered good practice to use the TFSA to supplement retirement savings, even if you have not reached your maximum allowable contribution to an RA. Instructions to Financial Institutions (with documentation) for this financial year end, need to be submitted by 22 February 2019!