It is almost time to close off the 2024 tax year which will be on 29 February. Anything tax-related has to be finalized before that date. There is the usual checklist you have to go through, and here are some of the things that should be on that list:
• If you are a provisional taxpayer, you have to submit your second IRP6.
• Last chance to make use of the tax deduction on retirement annuity contributions.
• Last chance to make your R36 000 tax-free investment contribution.
• Last chance to realize those capital gains tax profit or loss transactions and benefit from the rebate of R40 000.
• Tax-free donations of up to R100 000 per year.
Although tax is an important consideration when evaluating your investments, it should not be the only consideration. To illustrate this statement, consider the following: If you make a contribution to your retirement annuity, you get the tax deduction benefit, but you sacrifice the ability to invest 100% in offshore assets and the ability to withdraw all the funds at any time and you are under the obligation to invest the bulk of the funds in a restrictive living annuity when you retire from the fund.
Another example is the payment of capital gains tax (CGT). If your investment performed very well, it is sometimes very difficult to sell that investment and pay the 18% CGT to SARS before re-investing the balance in something that offers better value. If paying CGT becomes your only consideration, you might stay invested in an overvalued asset and either lose all the gains when that asset deflates, or you might miss out on the stellar potential of some other asset.
Our advice would be to do everything offered by SARS to limit the tax you pay on your investments, but not to be blinded by the inevitable obligation of paying tax at some stage.