Your portfolio

Your cart is empty. Go to All funds.

Why it’s a good time to top up your tax-free investment

Why it’s a good time to top up your tax-free investment

Related links

No related links

The end of this tax year is drawing closer and, while no one loves a deadline, this is one that could really be put to good use if you top-up your tax-free investment. Denver Keswell, our Senior Legal Advisor explains why. 

A powerful savings tool 

“Tax-free investments allow the investor to keep more of their returns as they are not subject to taxes. This can result in a higher overall return on investment compared to taxable investments. Tax-free investments are one of the most powerful tax-saving tools available to savers – especially when one stays invested in them for the long-term,” said Keswell. 

Unused savings don’t roll over 

Each tax year, you are allowed to allocate up to R36 000 tax-free to your tax-free investment (up to a lifetime limit of R500 000). “Any ‘unused’ portion of the R36 000 allowance does not carry over to the following year. This means that if you do not allocate the full amount before 28 February this year, you will not be able to make it up in future. You will however have an opportunity to allocate the full R36 000 in the following tax-year.” 

That’s why, by allocating as much as you can – or ideally investing the maximum of R36 000 per year - you can take full advantage of tax-free growth on your investments, which will compound over time. In the long-term, this compounding effect can make all the difference. 

An opportunity to commit your future self

“The end of the tax-year is also a great time to put structures in place that will help your future self stay committed to your long-term investment. While you can top up and maximise your allocation for this tax-year, you should also consider either topping up early in the next tax-year or commit yourself to regular saving by setting up a debit order. This way, the saving becomes automatic and is one less thing you need to think about,” advises Keswell. 

Get started today 

Opening a tax-free investment can take as little as 5 minutes. To get started, talk to your financial planner to find out more about how to harness the power of tax-free investments. For more insight, you can also listen to this podcast: Why everyone should consider tax-free investing.