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2024/2025 Tax Year - Contribution Cut-off

REMINDER: Retirement Annuity & Tax-Free Investment Cut-Off

As the 2025 tax year comes to an end, this is an ideal opportunity to review your investments and make the most of the government incentives designed to encourage saving. Please ensure that all your Retirement Annuity (RA) and Tax-Free Investment (TFI) contributions are completed in time for the 2024/25 tax season ending this month.

 

RETIREMENT ANNUITIES

 

A Retirement Annuity (RA) is a powerful tool for enhancing your retirement savings while offering significant tax advantages.

  • Tax Benefits: You can contribute up to 27.5% of your taxable income to an RA, with a maximum annual tax-deductible limit of R350,000.
    • This cap applies to all your retirement savings combined.
    • Contributions exceeding these limits can be carried forward for future deductions.
  • Tax-Free Growth: Your RA grows without tax implications, meaning no taxes on interest, dividends, or capital gains.
  • Tax-Efficient Access at Retirement: Upon retirement, you can withdraw up to one-third of your RA as a lump sum.
  • Flexible Investment Choices: Within the constraints of Regulation 28, you can invest across various asset classes, including equities (up to 75%), property (up to 25%), offshore investments (up to 45%), and hedge funds (up to 10%).
  • Long-Term Wealth Accumulation: Regular contributions can significantly enhance the value of your retirement savings over time.
  • Estate Duty Benefits: All allowable contributions and growth are excluded from your estate for estate duty calculations upon your passing.

 

 

 

TAX-FREE SAVINGS ACCOUNTS / INVESTMENTS

 

Although a Tax-Free Savings Account (TFSA) is not tax-deductible, it offers valuable benefits that can enhance your overall investment strategy:

  • Contribution Limits: You can invest up to R36,000 per year, with no tax on investment income or growth, until you reach the lifetime limit of R500,000. Contributions exceeding these limits incur a 40% penalty.
  • Tax-Free Growth: Your TFSA is completely exempt from capital gains tax and dividends tax.
  • Flexible Withdrawals: Unlike a Retirement Annuity (RA), you can access your TFSA funds at any time without restrictions.
  • Unrestricted Investment Choices: Unlike an RA, a TFSA has no limits on allocations to equities, property, or offshore investments.
  • Long-Term Wealth Accumulation: Regular contributions can significantly grow your TFSA over time, benefiting from compounding tax-free returns.

 

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