In 2020, Tax Freedom Day in South Africa fell on 19 May. Theoretically speaking, this is the point in time when South Africans earned enough income to pay taxes. In other words, up until then, every Rand you had earned was used to fund government expenditure.
With wealth and vaccine taxes being tabled and the tax year-end around the corner, many South Africans are looking for ways to cut their burden.
Below, we have outlined three easy ways you can use OUTvest to reduce your tax.
Option 1: Top up your Retirement Annuity:
One of the easiest ways to cut your tax contribution is to make a top-up to your . You can reduce your taxable income by up to 27.5% of your annual income or R 350 000, whichever is lower, contributing to a Retirement Annuity.
One of the great features of the OUTvest offering is we can tell you in real-time how much tax you will be saving when you sign-up for our RA offering. Below are two calculations using the salaries of R700 000 and R120 000 per annum:
The calculations above assume that you are not contributing to any other retirement products. And that you have contributed enough to earn the maximum tax rebate. Your situation might be different. These values were calculated using the.
We calculate the difference in the tax you paid, given your current annual salary, and the tax you would’ve paid if you reduce your yearly salary by the contribution allowed. The result is the rebate.
Step 2: Look at the Fixed OUTcome Endowment Product
Suppose you have been diligently saving and already topped out the reduction in your taxable income using your Retirement Annuity (RA) contributions. In that case, you can look at our Endowment product which offers high net worth individuals additional tax savings for those who prefer to save their money through money market and fixed deposit type products. Since the rate provided by the Fixed OUTcome Endowment is post-tax, all the interest earned will not be taxed.
Apart from the competitive interest rate, other great features of this particular tool are the ability to set up a tax-efficient endowment online in just a few minutes. It’s excellent for Estate Planning purposes as you can nominate beneficiaries that will receive the funds.
Step 3: Don’t forget your TFSA, your future self will thank you
While this is not an immediate tax rebate, your is one of the most straightforward tools for building long-term wealth without incurring the wrath of the taxman.
South Africans can contribute up to R36 000 per year into a TFSA up to R500 000 over your life-time. All dividends and income inside of the TFSA are tax exempt. Meaning you can get a triple benefit of low fees (if you are investing through OUTvest), pay no tax and enjoy compounding investments – more money in and more money out when you eventually want to cash-out.
Investment costs remain one of the single most significant determinants of your ability to build sustainable long-term wealth. That is, if you can find ways to invest in a tax-efficient manner, you will give yourself a very significant advantage in your financial journey.
OUTvest is an authorised FSP. All our investments are exposed to risk, not guaranteed and dependent on the performance of the underlying assets. Ts and Cs apply.