Pegging
Honorary Master
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A tfsa is not a transactional account. Did you get a card for it?
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Question of the Day: Have you ever flown Business Class or First Class?
Help me understand this (saving account)
- Thread starter DTBA
- Start date
SauRoNZA
Honorary Master
The tick box just means they need to send you the tax records for it every year to submit to SARS.
But you are exempt from interest based savings anyway until you have a lot more going on there.
SauRoNZA
Honorary Master
Not always. There are mechanisms where it makes sense to do in parallel.
TFSA/RA etc which has tax benefits.
But yes no normal investments outside of that.
true true there are nuances
SauRoNZA
Honorary Master
Regardless it’s a good default rule especially when dealing with the financially uneducated.
Yes I have my global one card (the black one) sorry if I'm sounding dumb but I just dont know much about how tax works and I was just freaking out
Alright thanks for clearing that up for me, I was freaking out with this whole tax thing and 36k limit and was under the impression my account was a tax free savings
zerocool2009
Honorary Master
Start educating yourself by reading up.
You're confusing this with obligation to pay tax. If you're under the tax threshold for your age you don't pay tax no matter where your earnings come from. Only exception is dividends which are taxed at the company level. Your status at the bank doesn't determine if you'll pay tax or not and you have to earn quite a hefty amount of interest to be taxed on it, at that point it would be better to have the money in fixed and semi-fixed products anyway. Not having the box ticked can cause hassles with your bank come tax return time if you're liable but other than that your status at the bank doesn't really matter.
One thing though, you mentioned side hustle. If you earn more than the tax threshold in total and more than the threshold for provisional tax from your side hustle you also have to register not just for tax but for provisional tax.
Yeah sorry I was just confused about this whole 36k limit that I've been reading about and had no idea that the global one savings account is not a TFSA and I don't have to worry about it, so aside from this, the tax threshold for the year is 73k right? (nomatter what type of account I have) or is it 95k? I'm 28
Tax threshold is R95 750 for 2024-2025, same as last year. That is for earnings and not how much you have in the bank. Provisional tax threshold currently seems to be R30k.
Corelli
Executive Member
Yes you are limited to 36000 in Tax free savings per year, even if you take out and put back it will be seen that you have added more which will leave you penalised. So ie you had 35 000 and withdrew 30 000, if you put that back you will be penalised for 29 000 over your annual limit of 36 000 (depending if that 35 000 was deposited that year.
Youre also limited to a total 500 000 total you can invest there.
Soo you can invest in a fixed deposit that can pay you out the interest monthly, yet you will pay tax on it, its nifty getting a few grand extra every month. Your capital will stay as it is. Or you can invest in funds like with Coronation. It does well
Youre also limited to a total 500 000 total you can invest there.
Soo you can invest in a fixed deposit that can pay you out the interest monthly, yet you will pay tax on it, its nifty getting a few grand extra every month. Your capital will stay as it is. Or you can invest in funds like with Coronation. It does well
Corelli
Executive Member
Dollar doesnt do great and interest is low.
More risk = more interest. Thus US may give you 2% interest while here you can get 9%
It's not just about interest. Invested amounts don't earn interest in any case. Interest is also not really linked to risk.
Ok thanks for clearing this whole thing about tax and sorry for me being dumb and not knowing that my account is not a TFSA, I'm only learning and trying to educate myself because I've been unemployed for a very long time and it's only this year I've made a total income of just over 30k since March, I think I would be under the 95k threshold come Feb.
supersunbird
Honorary Master
Nasdaq and S&P500 are about shares/equities, not interest. So point is?
Corelli
Executive Member
2 Options
1. Invest in shares or an umbrella fund. Shares pay dividens and has growth, umbrella fund has growth, but you will be paid out performance bonuses (ie Coronation Top 20 - vs say Microsoft Shares. If Microsoft doesnt pay dividends or make a loss and the share price drop then obviously your investment will drop.
2. Put money in a fixed deposit. It can pay the interest in a seperate account monthly if need be. It will be risk dependent on the US dollar vs rand (which isnt doing much). But your money is generally guaranteed with zero risk. However the returns may not be as big as shares etc.
Tax free savings allows you to invest 36 000 per tax year into the TFSA. The 36 000 is based on how much you have put in the account year to date, but not on how much is in the account. So if you withdraw say 10k, and put it back, it will be seen that you contributed 46k, and you will be penalised on that 10k at 40%.
Do note other accounts may request that you only get access or part during the year of investment You will have to wait for the money to mature based on how long you invested it in for. ie 24 months or 5 years.
Investing it in a foreign bank account gives you like 2% interest. Sure it protects you against the rand eval but you can honestly just buy gold or us dollars (if you know some people)
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And what does that have to do with interest?
Also since the Rand depegged from the Pound it has consistently devalued. So even if our interest is higher in Rand than in Dollar this will more or less match the devaluation of the Rand. We should also be aiming for 2% inflation but until then it doesn't matter much.
Corelli
Executive Member
The rand see saws agains the dollar
So you have to buy the dollar in the dips to gain, if you bought it went it was highest and the rand gains strength you would loose out. Do consider there are big risks for the dollar ie BRICS talks of dollar replacement as using the dollar for trade, and the fact that the dollar debt is about $52 trillion (thats how much IOUs the federal reserve wrote when they sold dollars to foreign countries for trade. Not to be confused with US government debt as $32 trillion.
If youre looking to Asia and you have actual dollars, they are strict with the condition of the notes (no damage, latest series etc). Or you can get less for your dollars.
So yes this is all part of the risk, if the rand tanks more and you have dollars you can score, but if the rand strengthens, you could loose.
So investment funds buy bits and pieces of everything and watch it like hawks. So its always good to chat to a financial advisor.
Do note you can only put about R1 million offshore as part of your foreign allowance per year.
If you invest in a local fund I would go for Coronation or Allan Gray.
I tend to like this fund. But it has more risk then other funds where your capital is 100% guaranteed. With Covid you would have noticed negative bonuses with some pensions where your pension actually loose value. When youre close to retirement you tend to put it in a fund that doesnt have that. ie Old Mutual Coregrowth where normally your funds are 100% guaranteed, so it wont have a negative bonus. But the downside is, due to less risk, means you will most likely not have such an aggressive fund, thus giving you lower rates of return).
Welcome Page
www.coronation.com
A lot of people tend to buy govt bonds that pay out a set amount. However you would need to decide your long term goals, do you want to move abroad? Property locally is good but has risks, depending on where you buy, but can give good growth. Etc.
Every decision you make carries a risk, so best to chat to a good financial advisor.
With shares you will have to watch how it performs and if it pays a dividend or not. You can use the dividends into buying more shares. But if the company crashes so does your investment.
Ironically buying actual gold sometimes seems the safest but other than growth you wont get monthly return as with some investments.
