Tax Free Savings Account (TFSA) In South Africa Explained | Everything You NEED To Know!
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- čas přidán 8. 04. 2021
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In 2015, the National Treasury introduced the Tax Free Savings Account with the hope of improving the overall savings rate of South African citizens, as they kind of hoped this will in effect lessen the burden on the government of providing for those in need after retirement.
Now it is definitely not very common to receive a gift from the South African government, especially with regards to saving on taxes, so it would absolutely make sense to take this opportunity on with both hands and squeeze the most out of it.
So in this video, I will be going over everything you need to know about a TFSA in South Africa, so that you can realise the beauty of this type of investment and hopefully open your own if you don’t have one already. Guys, you can literally save hundreds and thousands in taxes with a TFSA, so please do not let this opportunity pass you buy. At least watch the whole video and then decide for yourself if this is something that you want to invest your hard earned cash in.
Links mentioned in this video:
Inflation Rates and Investment Returns in South Africa: rb.gy/7sapzv
Check Out What These 9 Experts Hold In Their TFSAs: rb.gy/sk4qlp
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My name is Dr. Pieter Marx de Villiers, and I'm a Veterinarian turned Financial Advisor from South Africa who aims to retire by the age of 35. Follow me in my journey towards Financial Freedom in (hopefully) just 10 years! :)
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My FNB TFSA shows the percentage I've contributed this financial year. It also prevented me from transferring more than the allocated R36,000 by denying the transaction, due to the fact. So, thank you FNB!
Jah it's great that they implemented this limitation. Only problem is if we have more than 1 TFSA, they won't be able to track the contributions we made to the other TFSA, so ideally we must always keep track of our contributions manually as well.
I am soo glad i found this channel today, been binging on it and soo grateful for the content and how easily explained the concepts are. I am currently trying to build my portfolio on easy equities its been great assistance, thanks Pieter
Welcome aboard! I am really glad the videos are useful to you and your family. :) Feel free to let me know if there any specific topics you would like me to cover. ;)
Great video! One thing that I think isn’t clear, is that the actually money invested in a TFSA is still taxable at the personal income tax rate. It’s only the growth that isn’t taxed. Got into an argument with someone about this once 😂
Fantastic content, very helpful indeed. We need more of this locally! Tanks Pieter!
Valuable content. Thank you!
Hi Marx, thanks so much, this video is so helpful and insightful!!
Wow thanks for the informative videos!!
Only a pleasure. Thanks for watching Elardus :)
"It's not very likely to receive a gift from SA Gov, much less from tax" 🤣🤣
Great video Pieter!
Thank you for putting it together for all of us!
It's only a pleasure Jeremy. Thanks for watching! :)
Thank you for this video, very informative
Glad it was helpful Noma! :)
Thank you for explaining this so clearly and straight forward
It's only a pleasure Augusta. Thanks for watching :)
This video helped me a lot. Thank you
That's great to hear man! Thanks for watching
Very informative thank you! Thank you for hitting keywords before beginning aalways brings so much more understanding!
You're so welcome Clyde! Thank you for watching and subscribing, I really do appreciate it! :)
thank you this was very informative
Thanks for watching. :)
This is such a good breakdown bru appreciate it
Thank you for watching. I am glad you found it to be useful. :)
Excellent content, keep it up !☺
Thank you Ndzhaka :)
Just subscribed, thank you for the video , I bank with Nedbank and will look into the possibility of open up an Tax Free Savings account with them . I also have a policy with old mutual and might consider them . I will however watch this video a few more times
Thanks for the Sub Michael! Congratz on taking this big step! I would advise you go check out my video on the best way to invest in a TFSA, as banks are usually not the best option if you want to take full advantage of the tax breaks. :)
Great video.
Dankie Jacobus. Waardeer dit 😀
@@MoneyMarx Plusier man. Goed om van die finansieele video's te sien vir die mense van Suid Afrika.
Thanks Bru
Only a pleasure Sibiya :)
Thanks for the info, Pieter. Question: what are the implications of financial emigration for a TFSA? If you are granted permanent residency overseas, can you still make contributions to and benefit from your TFSA, and will a capital gains tax apply to the TFSA upon financial emigration (as is the case with other taxable assets)?
My satrix divi plus has not grown in the last year, on my tfsa
I like the video but, where can you put your lifetime savings
So how do I cancel it...since I'm no longer receiving some income or running low on savings and I was supposed to issue the first payment..
You explained everything well but the 18yr old that starts investing at 18 into their TFSA and retires on a pension of R23000 a month from this TFSA is not much to retire on as this R23000 will not be much of a pension due to the effects of inflation over several decades!
Hey Deter. The example I used in this video assumed a 6.5% real return, which means it takes inflation into consideration. This means if inflation averages around 6% per year, then the investments will actually grow with 12.5%, which is totally possible if you invest in growth assets such as equities and properties. So the R 23 000.00 at retirement is in today's money, which is enough for most people to live off of. And again, if you can find a spouse that can do the same you will be sitting on a lekker big nest egg, just from your TFSA. But yeah, it is always good to diversify your investments as well, so apart from a TFSA you can also look at investing into a RA and/or normal discretionary investments.
Hi Marx, thank you for a very informative video. Is there a way to transfer you TFSA to another institution, and if so how does one go about doing so? I have a TSFA with my current bank and would like to transfer it to a higher interest bearing investment account on the Franc APP. Thank you in advance for any advice.
Hey Claudia. Best would be to contact the provider to whom you want to move so that they can initiate the transfer. So in this case, contact Franc and tell them you want to move your TFSA to them and they will send you the necessary documents to complete. :)
Hi Pieter, I can't see any online material (from a South African perspective) on the implications of *foreign* withholdings tax implications on a South African TFSA. Any thoughts?
Hey. You will still need to pay tax on foreign dividends in a TFSA, and how much you pay depends on what the tax agreement is between SA and the specific country your ETF is registered in.
In SA, you are taxed at 20% for DWT, so all local dividends received is tax free within a TFSA. However,, for US ETFs, you will still need to pay 15% DWT on your foreign dividends, but you do get exempted from paying tax on the remaining 5% of the SA dividends.
retire by age35 is no joke. i did but realize its difficult . 8yrs from start, last 2.5yrs i saved over 95%of income monthly , saving monthly more than my provident grew in six months,inflation is enemy. godspeed. TFSA are a bit weak interest wise. double that interest available elsewhere, but compounding is king i agree.
Wow! Well done! Admittingly, this is a very ambitious goal I am placing for myself, but I am going to work very hard at escalating my income every year, and with enough hard work and determination I believe that it is possible to reach such a goal.
How did you reach your goal? In what kind of industry are you in? Saving 95% of your income is really impressive! Must be a combination of earning a ton and living very frugal? It would be really interesting to hear your story! Maybe I can interview you for a video on my channel sometime in the future? I believe many people will be inspired by a real life scenario like yours to show them that it is possible. :)
Can you buy rsa bonds through a tfsa?
Pieter, thank you so much for this informative video. I have a question, is there a percentage of the annual allowance that can be invested in international EFT's or Index Funds, or are we limited to JSE options only? For instance, could one invest in a Global Equity ETF with say Sygnia for offshore exposure. And if so, could the full R36k per year be used for this, or only a portion?
Hey Ryan. Thanks for watching. :) Yes, there is no limitation on how much and in what you can invest your TFSA, except for single stocks, hedge funds, and commodities. A TFSA is different from a RA, as a RA is regulated by Regulation 28, limiting your offshore exposure to 30%. But with a TFSA, you can allocate 100% of your annual contribution limit to an offshore ETF like Satrix MSCI World or Coreshares Total world if you would like to do so. Some people use their TFSA for the exact purpose of increasing their offshore exposure that they lack with their RAs. But Jah, it depends on your situation, but as far as limitations go, there are none when it comes to offshore ETFs 😀
@@MoneyMarx Awesome, thank you so much Pieter. You have yourself a new Subscriber. Keep up the high quality work!
@@PPCmobileZA Thanks Ryan! Will do😁
How could one go about checking their tax free limit in order to monitor that you aren't exceeding the annual/lifetime amount?
Hey Kit. I would just pop an email to the TFSA provider and ask them to send you a statement for the current tax year and then look at the contribution amount. If you have more than one TFSA, then you obviously need to add all of them together
Hey Pieter. Great video. I just wanted to know, If you invest your money in a spesific ETF ( such as MSCI world) in your TFSA and want to move that money to another ETF ( such as S&P 500) within the same TFSA if you can do that without sacrificing yearly and lifetime contributions and how you would do that? Also, is it easy or possible to swich TFSA between different providers? ( I'm with EasyEquities but am scared I might want to change to a different provider in the future)
Thanks Patrick! Yes so as long as your money stays within the TFSA, meaning that you don't physically withdraw any cash, you can buy and sell as many ETFs as you want without it affecting your yearly or lifetime contributions. You will also not pay any tax on capital gains, hence why a TFSA is such a powerful investment! Jah you can always transfer your TFSA from one provider to the next. Just pop your current and new provider an email and tell them what you want to do and they will send through the necessary documents. DON'T withdraw your funds in your TFSA and then redeposit them into another TFSA, as this will be seen as a normal withdrawal which will take a bite out of your yearly contributions, and if you exceed this yearly contribution limit, you will taxed at 40% of the difference, so please don't make this mistake.
@@MoneyMarx Thank you very much. Really appreciate it
So I'd like to ask if whether we can decide where we invest in?like for instance if I can use the funds to maybe invest in a Private company?or maybe a risky asset class like crypto?
Hey Tokelo. A TFSA does have restrictions as to what you can invest in. For example, you cannot invest in commodities (gold, silver, krugerrands), crypto or individual stocks. But if you want to to invest in these things then you can just put them into a discretionary account. But then you won't get the tax benefit associated with a TFSA or RA.
in which south African insurance you take out your life cover and ask for a loan to fund your business or lifestyle an in tax free saving accounted can I access my money in need
You should try to avoid withdrawing money from your TFSA as far as possible as that will eat away at your annual and lifetime contribution limit. Make sure you have a decent emergency fund in place before investing in a TFSA so that you are not forced to withdraw from your TFSA in case of an emergency.
CAN ASK QUESTION REGARDING TIMEBANK GOAL SAVING ACCOUNT IS IT THE SAME US TAX FREE ACCOUNT @@MoneyMarx
Hey Marx, if I've already saved R500 000 in my TFSA account, and then I choose to withdraw R100 000 , but later on ,I put in R50 000, the total amount i would've invested in my TFSA account would be R550 000, which is over the limit right ,but I would only have R450 000 in my TFSA account, would I start getting taxed because I've already surpassed the limit ?
Hey Mello. Yes, if the lifetime limit remains at R 500 000 and you effectively invested R 550 000, then you will be taxed at a rate of 40% on the R50 000 excess, which is R 20 000.
How would I then get to move my money in my TFSA from one provider to another? Do I contact the one my money's with, and then let them handle it on my behalf?
Hey man. Yes and contact the provider to where you want to transfer your TFSA so that they can facilitate the process. Please do not cash out your TFSA, otherwise you will lose a large chunck of your lifetime limit
Hi Pieter, I am now 45 yrs old and learning everyday..can I make up for lost ime by depositing R36K at the beginning of each tax year?In my mind I should then be able to leave the money for longer and address some of the lost investment time?Your thoughts?
Thak you
Hey Wentworth. It is never too late to start investing, and seeing that you still have at least 20 years before retirement,I'd say a TFSA is still a great option. You can make lump sum investments at the beginning of each financial year as that will allow youroney longer time in the market which will help compound the tax savings. Just be careful not to exceed the R36k contribution limit per year, as then you will be klapped with the 40% tax penalty
Hello everyone.
I'm a student wanting to open a tax free savings account with ABSA.
Reason: To save up money every month to pay for my flight tickets from Gauteng to KZN when recess time creeps up. (Minimum R100.00pm)
Why a tax free savings account? There are no charges when I transfer money from the tax free savings account to my normal debit account. In addition, I can access the money in the tax free savings account at anytime as opposed to a notice savings account where I would be charged heavily if I access the funds before the notice period
Is a tax free savings account the best option or should I rather opt for another account? If so, which one?
Hey Samkelisiwe. You are right that there should be no charges when withdrawing money from your TFSA and that you can access your funds at any time. But a TFSA should never be used as a savings account as it is meant to be used as a long term investment account where all your investments can grow tax free. You also only have a lifetime limit contribution of R500 000, and when you withdraw money from the TFSA this will reduce your lifetime limit.
I am going to make a video on how exactly to use a TFSA in the near future that you can watch, but in the mean time, please go check out my Investing in Cash video to see which options are available for your short term savings goal.
czcams.com/video/IfZjJU5ABl0/video.html
The links that you mention?
Hey Wilmari. I added the links in the description, sorry about that. :)
What happens if your TFSA keeps on falling? Decreasing in value?
Hey Mary-ann. That is normal with investments, it will go up and down in the short term but if you are invested in well diversified funds then it should go up over the long term. If your TFSA decreases in value then it does not affect your contribution limit at all. Just continue to invest every month and try not be bothered with short term losses. We are in unprecedented times so the markets are down, but it will pick up again :)
What market should i choose on easy equities, my tfsa has only lost money so far,
Investing in equities should be viewed as a long term investment. One year is a very short time frame and share investments will go up and down in the short term.
@@MoneyMarx awesome aiming now for 18 years for my baby boy, is satrix divi a good investment? On the tfsa?
Will I be changed if I only withdraw all my profits
But keeping my initial amount in the account
Can you continue to add to your TFSA after the age of 65?
Yes you can, if you haven't already reached your lifetime contribution limit of R 500 000.00
Wow this is an amazing video Pieter. Can you please explain how this TFSA would benefit my newborn if I open it on his name. How much would be available for him at the age of 18
Hi I understand the account , but can you provide with clarity ok the following: so I open up the account , put money inside , lets say R3000 a month , buy R3000 of stocks , next month the same . How do you tfa end up with R6 mil ? Is it due to the grow of stocks ? How can that be if that money is in stocks and not in the tfa ? Must I put the money I get from sold stocks back into the tfa ?
Hey Ruhan. Yes so you are allowed to transfer up to R36k into your TFSA every year which you can use to buy Unit Trusts or ETFs, you are not allowed to buy individual stocks. Once you buy your ETFs or Unit Trusts, they will grow with time and over a couple of decades the compounding effect of interest will help grow your TFSA value. But this takes decades of consistently investing every single month, so it is no quick and easy way to get rich.
@@MoneyMarx thanks for the reply marx - yes I understand the index part . However I can’t get my head around why you say a tfa is growing . Is it not your portfolio growing . Isn’t a tfa just like a middle man you put funds through to invest in an etf ? . Let’s say I only once in my life deposit money into a tfa , and that money I invest with . My investment is growing , however the amount in my tfa is zero , how can my tfa be growing .
Turning 24 and freaking out that I have a degree and work at a call center for R5000. Like this if you're me 😩
Hey Sisanda. Luckily in today's day and age, there are many ways you can make an extra bit of income online. Check out this channel for some examples of how to do this: czcams.com/channels/FKhCV5YUcU75ngIiQbdb2Q.html . Also, building wealth depends way more on what you save than what you earn, so don't be discouraged, you can still come out on top by applying good financial discipline. :)
How many tax free investments can one have?
Hey Raees. You can have as many as you'd like, but your annual and lifetime contribution is still applicable to the sum of your contributions to all your TFSA's/
Hi Money Marx, I am on PAYE and I want to use TFSA. If I put R36k for this year (the limit) on my TFSA, how do I get my refund for that (should I get a refund)? Or will it reflect on my TFSA automatically?
Hey Mika. Your contributions to a TFSA is not tax deductible, so you won't get a tax refund from SARS. What you are referring to is a Retirement Annuity (RA). I have a playlist on my channel that you can watch where I explain exactly how a RA works, so please check that out
Thanks mate, learning step by step...
Living life is so complex😂
Adulting is hard work haha
Hi, thank you very much for the video, I would like to know If you start with 3,000.00 in a savings account earning a 8% interest rate, compounded Annually, and make 3,000.00 deposits on a Monthly basis, after 13 Years your savings account will have grown to 815,522.21 -- of which 471,000.00 is the total of your beginning balance plus deposits, and 344,522.21 is the total interest earnings. The total interest R344,552.21 will be taxed?
No. Not with a tax free savings account
Hey Sifiso. Not at all. :) This is the great thing about a TFSA. You don't have to pay tax on interest income (which you will get in a bank savings account), dividend income or capital gains tax (which you would typically get when investing in shares). I would, however, not really recommend to invest your TFSA in just a normal bank account, as you need to have close to R 500 000.00 invested before you really get any tax benefit due to the interest income tax exemption that everyone already have. Your TFSA will benefit much more when invested in investments that trigger dividend income or capital gains, such as shares. And because it is seen as a long term investment, it would make more sense to invest in higher risk higher return assets as opposed to low risk low return investments such as a savings account or money market. But obviously, it all depends on you risk tolerance and needs. :)
Why would i leave 6 Million for R23000 and die at 65 due to corona 🙄 what a waste of money
Jah. You could also blow it all, actually become older than 65 and then have to live off of the government's grants if that's more your style...
Thanks bro✨.. Very informative 🙂
You're welcome :)