![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/11\/Investments.png\")
<\/a><\/p>\n1. Understand what the different taxes on investments are<\/strong><\/p>\n\u201cInvestment returns are subject to three different taxes, namely taxes on interest income, dividend taxes and capital gains tax. Understanding how these taxes work is an important step towards being more tax efficient with one\u2019s finances,\u201d said Keswell.<\/p>\n
Below he outlines the important considerations for each kind of tax:<\/p>\n
\n- Taxes on interest: South Africans are entitled to a tax exemption for the first R23,800 of interest earned. For over 65-year olds there is no tax on the first R34,500.<\/li>\n
- Capital gains tax: The maximum capital gains tax allowed is 18%. Furthermore, the first R40,000 of profit is exempt from capital gains tax and all base costs can be excluded. Primary residences are allocated a R2 million exemption, which can also be effectively used.<\/li>\n
- Dividend tax is often considered to be an \u2018invisible tax\u2019. This is because the 20% tax on dividends is paid by the company as a withholding tax before the dividend is paid out.<\/li>\n<\/ul>\n
2. Invest in tax- free investments \u2013 the no-brainer of investment options<\/strong><\/p>\n\u201cTax-free investments are one of the most powerful tax-saving tools available to savers \u2013 especially when one stays invested in them for the long-term,\u201d said Keswell.<\/p>\n
A savings initiative supported by Treasury, these investments are not taxed on capital growth, interest or dividends \u2013 and there are no penalties for withdrawal, although restrictions do apply to contributions.<\/p>\n
Currently South Africans can invest up to R3,000 per month and R36,000 per year (up to a lifetime limit of R500,000). It is however important to remember that the lifetime limit is not adjusted for withdrawals and remains R500,000, he said.<\/p>\n
“For this reason, this investment is ideal for longer-term investments where the full benefit of the compounding effect of the tax-saving on the investment can be realised,\u201d Keswell said.<\/p>\n
3. Don\u2019t panic when markets fall<\/strong><\/p>\n\u201cWhen markets fall it is distressing for all investors \u2013 and understandably so, but this is also often the worst time to disinvest as doing so only locks in the losses. Instead, try to stay unemotional about the situation and remember that you are invested for the long-term,\u201d said Keswell.<\/p>\n
However, he also agrees that this can be easier said than done.<\/p>\n
\u201cOne way to help yourself stay the course with your investments, especially in harder times, is to harness the power of the power of the debit order. It\u2019s easier to commit your future self than it is to commit now. Set up a monthly debit order for your investments so that each month, a set amount of money will be allocated to your investments without you needing to think about it.<\/p>\n
“You also benefit from the consistency of investments, effectively creating a buffer from market volatility – and all without having to consciously think about it.\u201d<\/p>\n
4. Finally, don\u2019t forget about fees<\/strong><\/p>\nWe can get so focused on tax that sometimes we forget to consider the fees of an investment. It\u2019s daunting to decide which fund is going to generate the highest return \u2013 and often impossible.<\/p>\n
“But it is possible to accurately assess what you will be paying for the investment.<\/p>\n
“Fees can have a significant effect on investment outcome and it\u2019s important to remember that an investment is only working for you if the fees are not eroding all the tax-efficiencies you gain.<\/p>\n
“Make sure you know what fees you are paying and that all the fees are disclosed before you invest in anything,” said Keswell.<\/p>\n
\nRead: A trader\u2019s prediction for 2021<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"In uncertain times being tax smart and investing optimally can go a long way to improving one\u2019s long term financial outlook. And no time has been more uncertain than now, especially given the effects of the Covid-19 pandemic.<\/p>\n","protected":false},"author":10,"featured_media":237713,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[26,15572],"class_list":["post-451348","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-headline","tag-nedgroup-investments"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/451348","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=451348"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/451348\/revisions"}],"predecessor-version":[{"id":458042,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/451348\/revisions\/458042"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/237713"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=451348"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=451348"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=451348"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}