ADVERTORIAL
Are you making the most of the tax incentives afforded to you by SARS? With interest rates having risen the past year, thereby increasing our bond repayments, a tax refund from SARS will be welcomed like rain to our catchment areas.
The best way to take advantage of these tax incentives is by contributing to your retirement. Whether it’s through your company pension fund or through a personal retirement annuity. The contributions are tax deductible up to 27.5% of your taxable income up to a maximum of R350 000. The below table illustrates the tax refund you can receive for each scenario.
In addition to the benefits you receive from retirement fund contributions you also enjoy tax-free growth in the fund meaning that capital gains, dividends and interest income are not taxed. All these incentives assist you in achieving your retirement goals.
If you have maxed out your retirement fund savings you can make additional contributions to a tax free savings account. Although you will not qualify for the tax deduction on contributions, you still enjoy tax-free growth, and the proceeds pay out tax free. You can invest up to R36 000 per annum and R500 000 over your lifetime.
It’s also important to note that retirement savings vehicles, not including a TFSA, will not form part of your estate upon death, thereby forgoing estate duty and executor’s fees.
This brings us to how effective estate planning can reduce your tax liability and therefore ensure your financial legacy to loved ones is maximised.
Estate duty is the tax on the transfer of wealth from your deceased estate to your beneficiaries. An abatement of R3.5 million is available in respect of every estate and is deducted from the net value of the estate to determine the dutiable amount.
One can minimise estate duty by:
- Bequeathing assets to your spouse by way of the Section 4q deduction.
- Invest into approved retirement funds.
- Transfer growth assets into an inter vivos trust.
- Use your donations tax exemptions to offload qualifying assets.
For a detailed retirement and estate plan you can contact one of the Edge advisers today.
