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What you need to know about tax-free savings accounts

30 Mar 2015

Johann BiermannImplemented on 1 March 2015, the much-discussed tax-free savings accounts give investors the opportunity to invest their funds without attracting taxes on interest or dividends. When considering this product, read the following important points.

Investors will be able to invest in most unit trust funds, bank savings accounts, fixed deposits, retail savings bonds and exchange traded funds (ETF’s). Capital gains generated within tax-free savings accounts will also not attract any taxes. However, funds that levy a performance fee will not be able to form part of the tax-free savings account.

  • Only natural persons, their insolvent estates or deceased estates may invest in the tax-free savings account. Companies and trusts may not invest in this product
  • There will be an annual limit of R30 000 and a lifetime limit of R500 000 when using this product. If you invest more than the annual limit of R30 000, you will pay a once-off penalty of 40% on the amount exceeding the limit.
    • If you were to invest R50 000 in a given tax year, you would have contributed R20 000 more than the limit. This R20 000 will be taxed at 40% (R20 000 x 40% = R8 000), making your net investment R42 000 (R50 000 – R8 000).
    • If you had previously contributed a total of R500 000 and you invest an additional R30 000 in the next tax year, you will pay a once-off amount of R12 000 tax (R30 000 x 40%) on the amount exceeding the limit, i.e. R30 000.
  • The tax-free savings account will be added to your estate and will be estate dutiable. This account may not be transferred from the estate to the beneficiary/beneficiaries of the estate. Beneficiaries may inherit the value of the savings account and invest it according to their wishes.
  • A tax-free savings account is a liquid investment and investors may withdraw from it at any time. It should be noted that contributions cannot be made again for a given tax year.
    • If you have invested R30 000 in a tax year, and you withdraw R20 000 during the same tax year, you will not be able to invest the amount of R20 000 again seeing that you already contributed the R30 000 permitted for the tax year.
    • If you have invested R100 000 over a period and withdraw the full amount, you will only be allowed to invest a further R400 000 during your lifetime. As mentioned above, the lifetime limit is R500 000.
  • The Select Manager MET Money Market Fund and Select Manager MET Cautious Fund of Funds will be available to invest in using the tax-free savings account via the Momentum Wealth platform.

For more information, contact Johann Biermann on tel 021 852 0382 or e-mail

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