Investing in Stocks/Shares

SauRoNZA

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#24
Make sure it's a TFSA type account at EasyEquities to get the tax benefit.

Then just stick the money in one of the broad ETFs. (ETF = Basically a basket of shares, so you're less exposed to the fortunes of individually picked shares).

Not entirely up to date on what the flavour of the year is on SA ETFs but SSB and Hamster should known I think
How about first getting a portfolio up to say 250k so that you actually need the tax benefit before locking yourself straight into a TFSA.

By that time the straight account can find the TFSA account's contributions.
 

supersunbird

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#25
How about first getting a portfolio up to say 250k so that you actually need the tax benefit before locking yourself straight into a TFSA.

By that time the straight account can find the TFSA account's contributions.
You'll only be able to annually put in R33 000 (or whatever they raise it to next). so you will never be able to convert much of it into a TFSA, thus you keep losing the tax benefit...
 
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HavocXphere

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#26
How about first getting a portfolio up to say 250k so that you actually need the tax benefit before locking yourself straight into a TFSA.

By that time the straight account can find the TFSA account's contributions.
Disagree. TFSA protects against capital gains, which with ETFs will accrue over time. And chances are the biggest cap gains will be on the shares you held the longest. So makes sense to stick the money into the TFSA early.

If capital gains weren't a factor then yes your logic would make sense.
 

SauRoNZA

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#27
Disagree. TFSA protects against capital gains, which with ETFs will accrue over time. And chances are the biggest cap gains will be on the shares you held the longest. So makes sense to stick the money into the TFSA early.

If capital gains weren't a factor then yes your logic would make sense.
Wasn't there an exemption applicable to CGT as well?
 

SauRoNZA

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#28
You'll only be able to annually put in R33 000 (or whatever they raise it to next). so you will never be able to convert much of it into a TFSA, thus you keep losing the tax benefit...
Well my logic was more at 250k odd at 10% annually you would almost fund the TFSA out of it.

But if CGT is applicable to all of it then no it doesn't make sense.

Almost certain that this was a recommended strategy from one of the big players though. Maybe it was for a specific vehicle.
 

HavocXphere

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#29
Wasn't there an exemption applicable to CGT as well?
There is but it's comparatively small (40k) and unlike div/int CGs are likely to hit in a more concentrated fashion rather than over time though.

Here's a fun one though - afaik SA doesn't specifically have a wash sale rule. So in theory you can cycle stocks through that exemption amount every year. That's probably flying quit close to the sun in terms of s80 so SARS could go after you if they were very determined.
 

SauRoNZA

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#31
Seems it is exactly what I thought it was and the values have gone up.

https://m.fin24.com/Money/Money-Clinic/Tax/Capital-gains-tax-exclusion-questioned-20150511

http://grayswan.co.za/wp-content/uploads/2017/12/TFSA_December-2017.pdf

Second link is better as it explains exactly my concept and why you shouldn't jump straight into a TFSA.

So you invest your money into a normal account until you reach near the 40k limit.

Say 400k @ 10%.

Then you cash out your 40k and put 33k into the TFSA and have the 7k as a Christmas bonus.

Win win.
 

HavocXphere

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#32
What is this 40k exclusion they are referring to?

http://www.sars.gov.za/AllDocs/OpsD...ains Tax for Individuals - External Guide.pdf

The word exclusion over exemption tells me it's maybe not the same thing.

But if that 40k means you can make up to 40k in profits without being taxed then the logic is sound.

If it's something else, well then it doesn't work
It's 40k net gains per year on disposal.

So when you're 120 years old and selling your shares then that gain is offset against the 40k (in todays money) - which won't be enough to offset 120 years worth of gains. While if it were in a TFSA there is no cap on the gain that is untaxable.

The pattern in which the gains/profits become taxable is fundamentally different to the interest/div your thinking of. Hence diff logic.
 

SauRoNZA

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#33
It's 40k net gains per year on disposal.

So when you're 120 years old and selling your shares then that gain is offset against the 40k (in todays money) - which won't be enough to offset 120 years worth of gains. While if it were in a TFSA there is no cap on the gain that is untaxable.

The pattern in which the gains/profits become taxable is fundamentally different to the interest/div your thinking of. Hence diff logic.
Yes but the concept would be to dispose annually up to that value to gain the benefit of not paying tax.

You build the capital up in the normal account until it becomes taxable. Then you "move" it to the TFSA.

Which almost doubles the lifetime limits.

When the TFSA is capped as well you'll start paying tax, but it's still a massive win win because you've extended it so much further.

I know its separate from the interest/dividend exemption.

See my second posts with the links.
 
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SauRoNZA

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#34
https://m.fin24.com/Money/Investments/when-not-to-use-a-tax-free-savings-account-20170130

"For instance, the current capital gains tax exclusion is R40 000 per year. If you chose investments with strong capital growth it could potentially exceed the capital gains exclusion within five years. Thereafter, you would be better off having this money in a TFSA than elsewhere.

Consider that the current annual interest exemption for people below age 65 is R23 800 per annum and this is not going to be increased in future. If you are younger than 65 and select only interest-bearing funds earning, say, 6% per annum, the fund would have to be worth R396 667 before the interest exemption is exceeded.

It would take you just over 10 years to reach those levels of investment in a TFSA if you invested R30 000 per year into interest bearing assets earning 6% per year."

So even better do a CGT investment until you reach the threshold.

Then dump all of that into a Money Market account until you reach the interest limit.

Or flip them around if you like.

Then only do a TFSA.

You'll be sitting on R1,300,000 odd before you start paying tax.
 
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HavocXphere

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#35
You're kinda mixing & matching concepts a bit there...

What they're describing there applies to investments that yield interest without capital gains. There yes you'd want to keep them out until you hit the exemption cap. Interest bearing investments isn't really the purpose of this thread though.

With stuff like stocks (growth ones specifically) you're by my estimation better off sticking them straight into the TFSA if you're reasonably confident that it's a long term investment. Other option as vaguely alluded to is the wash sale route. You could in theory delay sticking the shares in that way but you'd run out of exemption very fast due to the 3 year rule and as I said SARS might deem the approach shady.

Keep in mind there is no limit in the TFSA on gains, only on contributions. So strategically you should be placing the highest return investments into the TFSA - and that is historically equity....unless of course they're fairly pure dividend shares or interest bearing & under the cap.
 

SauRoNZA

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#36
Purely interest bearing is why I mentioned Money Market as a separate stream so you could focus your efforts on both exemptions more directly.

Is any share ever considered interest bearing? It should always be CGT (if kept long enough) as you are promoting from the gains made in the price of the asset.

Interest bearing would apply to anything that has a static profit based on agreement? So can't really be a share price.

Except in an ETF that holds part cash of course.

Ultimately it all comes down to when you plan to pull the money out and in the case of a TFSA if that is anywhere in the next 10-20 years and you are still quite young it would be a bit silly to lock it in there if other tax free avenues are available.
 
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HavocXphere

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#37
Is any share ever considered interest bearing?
No. You're on a bit of a detour mission here with your interest story & resulting tax structuring implications. ;) But interesting anyway.

Ultimately it all comes down to when you plan to pull the money out and in the case of a TFSA if that is anywhere in the next 10-20 years and you are still quite young it would be a bit silly to lock it in there if other tax free avenues are available.
Definitely. I eschew RAs for that reason. I like them as a product (easy win on tax) but need a lot more flexibility than they can offer.
 

Hamster

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#38
I don't get it. Whats the difference between that and first maxing out your TFSA and then saving for the extra R400,000? This way you'll have longer compound growth on tax free assets so surely it'll get you more in the end?

And if they keep on moving the CGT exemption amount you'll just wait longer and longer to start your TFSA.
 

SauRoNZA

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#39
I don't get it. Whats the difference between that and first maxing out your TFSA and then saving for the extra R400,000? This way you'll have longer compound growth on tax free assets so surely it'll get you more in the end?

And if they keep on moving the CGT exemption amount you'll just wait longer and longer to start your TFSA.
Access to the funds without affecting the overall contribution.

Say in the case of my daughter's funds now (3 1/2) at present.

If I want to have her use that funding at 18-20 to do to university or travel the world or whatever if it gets pulled out of the TFSA it has a lasting knock on effect as it can't be placed back into the fund.

However with the normal account it could be skimmed off the top and re-contributed.

Different story if you could max out the TFSA and only skim money off the top, that would work but to the same really.
 

SauRoNZA

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#40
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