{"id":851355,"date":"2026-02-18T14:30:00","date_gmt":"2026-02-18T12:30:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=851355"},"modified":"2026-02-18T14:31:32","modified_gmt":"2026-02-18T12:31:32","slug":"calls-to-change-r500000-tax-free-limit-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/budget-speech\/851355\/calls-to-change-r500000-tax-free-limit-in-south-africa\/","title":{"rendered":"Calls to change R500,000 tax-free limit in South Africa"},"content":{"rendered":"\n

Old Mutual has called on Finance Minister Enoch Godongwana to increase the contribution cap for tax-free savings investment accounts to at least R600,000, and bump the annual limit to R40,000.<\/p>\n\n\n\n

Introduced in March 2015, tax-free investment accounts allow South Africans to save a maximum of R36,000 per year, with all interest, capital gains, and dividends not being taxed. <\/p>\n\n\n\n

The aim of the tax-free accounts was to encourage South Africans to save, given the nation’s chronically weak savings culture.<\/p>\n\n\n\n

Old Mutual believes it is time to increase the limits to reflect economic realities and improve long-term financial and retirement outcomes. <\/p>\n\n\n\n

The annual contribution limits have been adjusted over time, increasing from R30,000 per year to R33,000 in 2019 and R36,000 in 2021. <\/p>\n\n\n\n

The lifetime contribution cap, however, has remained unchanged at R500,000 since inception. At current limits, an investor would reach the maximum contribution limit in approximately 14 years. <\/p>\n\n\n\n

Lizl Budhram, Head of Advice at Old Mutual Personal Finance, said that tax-free investment accounts can play an essential role in helping individuals strengthen their retirement outcomes. <\/p>\n\n\n\n

However, the R500,000 lifetime restriction limits the long-term usefulness of these accounts as complementary retirement savings vehicles.<\/p>\n\n\n\n

“Tax-free investment accounts were introduced with the right intent, but more than ten years on, the contribution limits need to better reflect the foundational objective behind their introduction,” said Budhram.<\/p>\n\n\n\n

“When used alongside retirement funds and preservation vehicles, these accounts allow investors to build tax-efficient savings that can supplement retirement income and provide flexibility later in life\u201d.<\/p>\n\n\n\n

Calls for R40,000<\/h2>\n\n\n
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With Godongwana revealing the National Budget next week, Budhram has asked the Finance Minister to increase the annual contribution limit to R40,000 and the lifetime limit to R600,000.<\/p>\n\n\n\n

\u201cAn increase to R40,000 a year, which works out to just over R3,300 a month, would remain disciplined and accessible for many savers while significantly enhancing the long-term value of the tax-free benefit.”<\/p>\n\n\n\n

“Increasing the lifetime limit to R600,000 would also extend the investment horizon, allowing investors to benefit from tax-free growth for longer,\u201d she says.<\/p>\n\n\n\n

She said that increasing the limits would reinforce the original intent of tax-free investments and give South Africans a more realistic opportunity to build wealth without the long-term erosion of tax. <\/p>\n\n\n\n

While Budhram has called for higher investment allowances, investors do need to be careful in how they use the accounts. <\/p>\n\n\n\n

Exceeding the annual limit can be costly, with any excess contributions subject to a 40% penalty tax on the excess.<\/p>\n\n\n\n

Notably, although the investment returns may cause the value of a tax-free investment account to exceed the annual or lifetime limits, this growth does not count as a contribution. <\/p>\n\n\n\n

Issues can arise when investors withdraw returns and then reinvest those amounts into a tax-free investment account, as this is seen as a new contribution. <\/p>\n\n\n\n

\u201cThe tax-free benefit applies to the growth within the account, not to repeatedly withdrawing and reinvesting funds,” said Budhram<\/p>\n\n\n\n

“Investors need to be careful when moving money in and out, as any amounts withdrawn cannot simply be replaced.” <\/p>\n\n\n\n

Moreover, the annual contribution limit applies in aggregate across all accounts, meaning the current R36,000 yearly limit would be applied no matter how many accounts you have. <\/p>\n","protected":false},"excerpt":{"rendered":"

Old Mutual has called on the government to increase the lifetime cap for tax-free investment accounts, which has not been changed for a decade. <\/p>\n","protected":false},"author":95,"featured_media":812962,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13716],"tags":[1110],"class_list":["post-851355","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budget-speech","tag-old-mutual"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/851355","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\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=851355"}],"version-history":[{"count":5,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/851355\/revisions"}],"predecessor-version":[{"id":851375,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/851355\/revisions\/851375"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/812962"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=851355"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=851355"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=851355"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}