How to legally pay less tax in South Africa
A financial adviser at Alexforbes, Zander Loots, has provided ways for South Africans to reduce the tax they have to fork over to SARS.
Speaking in an interview with Classic Business, Loots said that the last two months of this year are a narrow window before the financial year closes, and it is often the difference between smart tax planning and missed opportunities.
He explained that in the next few weeks, South Africans will either make one of the smartest financial decisions of the year or miss another opportunity that they certainly won’t be able to get back in this tax year.
According to Loots, February is such a critical moment because it marks the final chance to influence your taxable income for the year. With this in mind, he highlighted ways taxpayers can legally get some payback for their hard-earned money.
One of the most effective tools available to taxpayers is the retirement annuity (RA). Loots said many people dismiss RAs because they believe the money is locked away forever.
“Some people hear ‘retirement’ and think this is money they’ll never see again. However, at a practical level, an RA can reduce your tax bill today, not just in 30 years’ time,” said Loots.
He explained that RA contributions are deductible against taxable income, up to legislated limits.
“If you contribute R10,000 for the year, your taxable income technically reduces by R10,000,” Loots said.
“Depending on where you fall on the progressive tax tables, SARS will rebate you that money when you submit your tax return.”
In other words, part of what you contribute effectively comes back to you through lower tax.
Beyond the immediate rand-and-cents saving, Loots added that the real benefit is often overlooked.
He explained that it actually drops you into a lower band, which means you pay less tax going forward.” That saving can then be reinvested.
“The money you get back is a great way to reinvest further into retirement annuities or other savings vehicles.”
Underutilised opportunity
Loots also pushed back against the idea that retirement annuities are rigid and inflexible. “Most people think you have to commit to a fixed monthly amount and that’s it,” he said.
He noted that investors can make once-off contributions if they receive a bonus, a tax refund, or extra cash.
“You can invest that money once-off into your retirement annuity without the hassle of fixed monthly debit orders,” he said, making RAs far more adaptable than many assume.
Loots also highlighted tax-free savings accounts (TFSAs) as a powerful—though often underutilised —complement to RAs.
“They’re different tools in the same toolkit. The big similarity is non-taxed growth.” He explained that tax-free savings are not subject to tax on interest, dividends, or capital gains.
While contributions are capped at R36,000 a year and R500,000 over a lifetime (excluding growth), Loots said the long-term impact can be substantial.
“Clients who started tax-free savings in 2015 and contributed the maximum every year have seen significant tax-free growth. Their portfolios are in a very good place — and that can be used for retirement.”
Unlike RAs, tax-free savings also offer more access flexibility. “You can use it when you retire to pay off your home, create extra income, or keep it as an emergency buffer,” Loots added.
Used together, RAs and tax-free savings can significantly reduce lifetime tax while strengthening long-term financial security.
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