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Tax season’s almost over.

Take advantage of your annual tax-free allowance by investing before end-February.

Did you know that there is an easily accessible investment product for South Africans in which you don’t have to pay any tax on your investment growth (interest income, dividend or capital gains)? It’s called a tax-free investment (TFI) and you can start investing in one today for as little as R250 a month with Coronation.

Many South Africans don’t know that the government offers a tax break with no strings attached to encourage you to save – You are allowed to invest up to R36 000 each tax year tax free! 

With the current tax year ending on 28 February, now is the time to take full advantage of this year’s allowance before it’s too late. At Coronation, we encourage you to start to invest tax free as early as possible and to keep that money invested for as long as possible. Here’s why:

First In

If you are starting your investment journey or have extra money to invest for yourself or your children, first consider taking advantage of your annual tax-free allowance. By starting to invest tax free early, you give yourself the best opportunity to benefit from investment returns that not only compound over the long term, but compound tax free over the long term. 

While you can withdraw your cash from a TFI whenever you like, you can’t put it back. All amounts invested count towards your annual (R36 000) and lifetime (R500 000) tax-free limits regardless of any withdrawals you make. In other words, you can’t ‘replace’ the money you withdraw with a new investment. So, we encourage you to start building up to that lifetime limit early (and to keep that money invested) to maximise the time it has to benefit from compound growth (as is clear from the graph below). 

Last Out

A TFI is money that you ideally want to leave invested for as long as possible. The longer you leave your money invested tax free, the harder compounding will work for you. So, for example, if you are saving for short-term goals such as a holiday or a deposit on a car, rather do so separately and leave your TFI to grow over time. 

Investing over multiple decades enables your money to withstand the effects of short-term market volatility that is typical of the financial markets. Over the long term, the bumps smooth out and the overall trend is for your money to grow.

Good Things Come To Those Who Don’t Wait To Invest Tax Free

You can start investing tax free with Coronation via a monthly debit order from as little as R250, or you can make lump-sum investments from R5 000 up to R36 000 at any point during the tax year. If you have an existing tax-free savings account with a bank, you can easily switch it to a TFI at no cost.

Tax season is almost over. So get in now by finding the right Coronation tax-free investment fund for you here or speak to your financial adviser. DM/BM

Coronation is an authorised financial services provider. 



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