Tax-free investment accounts – your questions answered

Take a look at our tax-free investment range where we and explain how the tax, the annual and lifetime limits and the withdrawals would work. Here we cover the lesser asked, but important, questions relating to these tax-free investments.

Q: Can I open an account on behalf of a child?

Yes, you can open a tax-free account in the name of your children and sign the application on their behalf, if they are minors. By doing this you will be using part of their tax-free allowance, which limits their ability to save for themselves via this type of product later on. Moreover be careful of donations tax if you donate more than R100 000 per year. You need to declare the amount that you invested in your child’s account in your tax return.

Q: Can I have more than one tax-free savings account? 

Yes, there is no limit on the number of tax-free savings accounts you can have. Make sure your annual payments across all approved tax-free savings accounts (with us or any other provider) do not exceed the annual contribution limit, though.                                                                                                    

Q: What is the minimum amount that I may invest?

You can invest from R500 per month and/or a lump sum of R10 000.

Q: What happens when I want to invest more than R3 000 per month?

Your contribution is capped at R36 000 per tax year or you can have a recurring debit order of R3 000 a month, and the lifetime capital contribution is limited to R500 000. Because you will be taxed at 40% on any contributions beyond this point, you will be notified by Sanlam Collective Investments and Satrix Managers, who in turn will inform SARS as part of the required reporting. 

Q: How does a tax-free savings account compare with an RA?

A great benefit of both a tax-free investment account and a retirement annuity (RA) is that all the growth and income of the investment is tax free. This includes tax on interest, dividends and capital growth. However, with an RA, the moment you start drawing a retirement income, that annuity income becomes taxable at your personal income tax rate. In contrast, withdrawals from a tax-free investment are not taxable. On the other hand, your RA contributions are tax-deductible up to 27.5% (capped at R350 000) of your non-retirement funding income for the tax year, while your contributions to a tax-free savings account are not tax-deductible. Both products have their own benefits and should not be seen as competing with one another, but as complementary components of a holistic financial plan. It’s always in your best interest to seek advice from a financial intermediary if you’re uncertain about which product best suits your savings need.

Q: The annual R36 000 limit is relatively low. Is this investment worth the while?

The tax benefits could be low initially, but the longer you leave your funds invested, the more they accumulate, and the more you save. You can use the tax-free investment for short-term savings, but the growth of the investment and therefore the tax benefits are higher over the long term. These products are specifically regulated by National Treasury to benefit you over a longer savings period.

Q: What is the impact of withdrawals?

Although allowed, withdrawing may not be a great idea. For example, if you invested R20 000 and then withdrew R20 000 in the same tax year, you would only be able to contribute an additional R16 000 in the same tax year before reaching the R36 000 annual contribution limit.

Q: How would I open a tax-free account?

Call us on 0860 100 266 or visit Smart Invest to invest tax-free online.

Q: What about the fees?

Sanlam Investments’ fee structure is highly competitive. Read more about the fees here.

DISCLAIMER: Sanlam Investments consists of the following authorised Financial Services Providers: Sanlam Investment Management (Pty) Ltd (“SIM”), Satrix Managers (RF) (Pty) Ltd, and has the following approved Management Companies under the Collective Investment Schemes Control Act: Sanlam Collective Investments (RF) (Pty) Ltd (“Sanlam Collective Investments”) and Satrix Managers (RF) (Pty) Ltd (“Satrix Managers”). (RF) (Pty) Ltd. The Sanlam Group is a full member of the Association for Savings and Investment SA. The tax free savings products are administered by Sanlam Collective Investments and Satrix Managers

 Although all reasonable steps have been taken to ensure the information on this website/advertisement/brochure is accurate, Sanlam Collective Investments (RF) (Pty) Ltd / Satrix Managers (RF) (Pty) Ltd (“Sanlam Collective Investments”)/(“Satrix”) does not accept any responsibility for any claim, damages, loss or expense; however it arises, out of or in connection with the information. No member of Sanlam gives any representation, warranty or undertaking, nor accepts any responsibility or liability as to the accuracy of any of this information. The information to follow does not constitute financial advice as contemplated in terms of the Financial Advisory and Intermediary Services Act. Use or rely on this information at your own risk. Independent professional financial advice should always be sought before making an investment decision.  

 Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium- to long-term investments. Please note that past performances are not necessarily an accurate determination of future performances, and that the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available from the Manager, Sanlam Collective Investments (RF) Pty Ltd / Satrix Managers (RF) (Pty) Ltd, a registered and approved Manager in Collective Investment Schemes in Securities. Additional information of the proposed investment, including brochures, application forms and annual or quarterly reports, can be obtained from the Manager, free of charge.  Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in the portfolio including any income accruals and less any  deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of the portfolio and the investor will differ depending on the initial fees applicable, the actual investment date, and the date of reinvestment of income as well as dividend withholding tax. Forward pricing is used.  The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The performance of the portfolio depends on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date.  Lump sum investment performances are quoted. The portfolio may invest in other unit trust portfolios which levy their own fees, and may result is a higher fee structure for our portfolio. All the portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No 45 of 2002 (“CISCA”). International investments or investments in foreign securities could be accompanied by additional risks such as potential constraints on liquidity and repatriation of funds, macroeconomic risk, political risk, foreign exchange risk, tax risk, settlement risk as well as potential limitations on the availability of market information. The Manager has the right to close any portfolios to new investors to manage them more efficiently in accordance with their mandates.  The portfolio management of all the portfolios is outsourced to financial services providers authorized in terms of the Financial Advisory and Intermediary Services Act, 2002. Standard Bank of South Africa Ltd is the appointed trustee of the Sanlam Collective Investments Scheme/ Standard Chartered Bank is the appointed trustee of the Satrix Managers Scheme.