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2 Mar 2017

TAX FREE SAVINGS ACCOUNTS INCREASED TO R33000

The joy I had when I learnt that the allowance for tax free savings accounts increased to R33000 from R30000 per annum. Most followers know that I am a fan of this government initiative. You may go check my previous posts on tax free savings account in South Africa, then choosing ETFs for my tax free savings account and low cost tax free investment to judge the excitement for yourself. R33,000 may be low, but it is a move in the right direction. The whole 10% increase, WHOOP!!!
tax free savings accounts increased to R33000
In his 2017 budget speech, Minister Pravin Gordhan had a lot of negative tax proposals. What's with the new 45 percent tax for above R1.5 million income earners, an increase in the dividend withholding tax to 20 percent, and an increase of 30c per litre in fuel levy and 9c per litre in the road accident fund levy. We are not surprised with the increases in the excise duties for alcohol and tobacco.


The part on the allowance for tax free savings accounts increased to R33 000 came as a pleasant surprise. Some feel it is a rather small increase. I am a happy chappy with any increase for sure. There are a number of ways in which one can increase their tax free benefits using these accounts. I, for instance intend to open a tax free account for my son this year. Some of his ETFs savings are better off there, as long as he is not going to use the cash anytime in the near future. He is one guy who does not like property investing. A story for another day. 

For the monthly savers and investors who want to maximise the benefit, R2750 will be their monthly contribution from March to February. One can save less than that if that is what they afford to put away. The lump-sum is another option for those with cash reserves.

As I mentioned in the past, I am using Exchange Traded Funds (ETFs) for this account. Reasons being that this is a long term savings benefit limited to R500,000 in one's lifetime which should earn the highest returns possible. Withdrawing from this account should be avoided. I wanted to add "at all cost" in the previous statement. This can serve as one of those cushy retirement provisions.

Another important piece of information is that, we will not be able to transfer our savings within the different service providers until 1 March 2018. When the National Treasury finally implements this provision, we will be able to move our investments from one service provider to the other without losing our benefits.  Investors will have to give an instruction to their service providers to transfer the funds on their behalf. It is important to note that, this will not be a self service function.

If you have not started with your tax free savings, 2017 may be the time you do. The sooner the better.
More posts on ETFs can be accessed here.

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