Contributions to a tax-free savings account are made from post-tax income and gives you the liquidity of a flexible investment. The total annual contribution in a tax year may not exceed R36 000 and your total lifetime contributions may not exceed R500 000.
A tax-free savings account is therefore an effective way to save for your goals as any interest, dividends or capital gains from your tax-free savings account will be free of tax.
Although there are many variables, tax free Investments normally perform better as the asset managers do not have to take any tax in to account when doing any trades. This effectively means there are less expenses in the back end of the investment.
While the lifetime limit of contributions are capped at R500 000, all earnings and growth can continue past the contribution limit as long as the capital stays invested and therefore there is no growth limit. This lifetime contribution limit might increase in the future to offset inflation, but will still have no effect on growth and earnings that exceed it.
Tax-free savings accounts can be used for the following purposes:
Supplement retirement savings
Ruvan J Grobler RFP™