Is there any law that prohibits this?

[Alton Turner Blackwood]

So I have a TFIA with SBG which I'm getting dividends from.

If, instead of reinvesting these dividends, I change the dividend payout account to a TFSA, would there be any penalties. Of course assuming that I've already maxed out the receiving account's R33k, annual limit.

 

[c10n3d_0r6]

I don't see anything wrong with it as long as you're still paying the tax on the dividends when you receive them. Once invested in the TFSA, any gains would be tax free.

 

[Alton Turner Blackwood]

I don't see anything wrong with it as long as you're still paying the tax on the dividends when you receive them. Once invested in the TFSA, any gains would be tax free.

A TFIA doesn't pay any dividend withholding tax

 

[c10n3d_0r6]

Ah right. Would probably be best to speak to an accountant, but from my understanding of the rules, you could invest the dividends into another tax free account up to the R33 000 yearly limit.

Wouldn't having the dividends reinvested in the TFIA be better as they would then not count towards the R33 000 limit? Unless I'm wrong here and the dividends also count towards the limit.

 

[supersunbird]

So I have a TFIA with SBG which I'm getting dividends from.

If, instead of reinvesting these dividends, I change the dividend payout account to a TFSA, would there be any penalties. Of course assuming that I've already maxed out the receiving account's R33k, annual limit.

It might be seen as contributions above the R33 000 limit and might thus attract a 40% tax on these overcontributions. Not 100% sure, but it might be a possibility.

Not that we have TSIAs in South Africa and thus you should use the term TFSA for everything, as some people might not know what you are referring to.

 

[SauRoNZA]

Hmm technically it remains in the Tax Free pool but I'm guessing in this case it would move from one provider to another and there wouldn't be any internal "tracking" to facilitate it so you would need to do it yourself.

The paying out to another account is where it gets sketchy and would probably break the rules.

You'd need to "move" it from one provider to another to do it perfectly legally which is a ballache.

 

[Alton Turner Blackwood]

It might be seen as contributions above the R33 000 limit and might thus attract a 40% tax on these overcontributions. Not 100% sure, but it might be a possibility.

Not that we have TSIAs in South Africa and thus you should use the term TFSA for everything, as some people might not know what you are referring to.

Yeah, but what do you call this given the fact that you choose the ETF's that you want to invest in. https://securities.standardbank.co....ublic/Ost/products/taxfreesavingsaccount.html

 

[supersunbird]

Yeah, but what do you call this given the fact that you choose the ETF's that you want to invest in. https://securities.standardbank.co....ublic/Ost/products/taxfreesavingsaccount.html

I wonder if TFIA is a name SB can use and how SARS and whatever the FSB is called now will view it.

Many other ETF providers just call it a TFSA, since we are not in the UK.

As to your question, since you are not doing an official move of funds, I think it will not be seen a TFSA to TFSA and SARS will tax you 40% on these overcontributions.

Why not reinvest the dividends?

 

[Alton Turner Blackwood]

I wonder if TFIA is a name SB can use and how SARS and whatever the FSB is called now will view it.

Many other ETF providers just call it a TFSA, since we are not in the UK.

As to your question, since you are not doing an official move of funds, I think it will not be seen a TFSA to TFSA and SARS will tax you 40% on these overcontributions.

Why not reinvest the dividends?

My question was hypothetical. I'm reinvesting at the moment. I just thought that it might be a loophole: invest in ETF's that pay out quarterly and have that paid out into another TFSA, while you continue your original monthly investments into the original account.

 

[NoviceDIYer]

My question was hypothetical. I'm reinvesting at the moment. I just thought that it might be a loophole: invest in ETF's that pay out quarterly and have that paid out into another TFSA, while you continue your original monthly investments into the original account.

I might be misunderstanding you, but are you reaching the 33k cap on one tax free account and then having a second one where you want to push the dividends to? SARS will to penalize you because the 33k cap is total allowed over all your TFSAs, not per individual account.

Or are you not maxing out the account?