Looking at your first pay slip in your first job, you see the gross salary. It's probably at the top of the sheet and looking good. But it's all downhill from there, with one deduction after the other until you get to the bottom line, the net income. This is how much of your salary will actually end up in your account.
Feel that wave of resentment rising? Anyone in a salaried job knows the feeling. Deductions for things like medical plans, a pension fund and unemployment benefits are in your interest. But the tax? Isn't this just the state taking money you've worked for?
Not really. Tax is part of the funds the state needs to keep the country running and growing. So though experts and politicians argue about who must pay, how much and on what, tax works to your benefit as well.
That doesn't mean you can't look for ways to be smart about tax. There are legitimate ways to pay less.
If you're self-employed, you can claim deductions for business expenses from your computer to the cost of your home office. Let an expert help you with this. If you get any part of it wrong, your entire claim might be rejected.
If you work for a salary, the most common and useful option is saving for retirement in a retirement fund, for example retirement annuities, pension and provident funds. You qualify for a tax deduction, up to certain limits, on contributions that you make to a retirement fund.
You can donate as much as 10% of your taxable income to registered Public Benefit Organisations and deduct your good deed from your taxable income.
Another option is tax-free savings plans. You're investing money that's been taxed already, but you won't be taxed on the returns. Current law allows you to save R46 000 per year up to a maximum of R500 000 during your lifetime in this kind of plan. Ideally, you should not touch this money for three to five years, but you can withdraw your funds at any time without being taxed on it.
Have a look at the Old Mutual Tax Free Savings Account. You can choose from a range of investment funds and how you want to invest - lump sums, regular investments or both, and you can decide for how long you want to keep going.
Need help?
Our friendly financial advisers are on hand to assist you with making investment decisions that are right for you. You can opt for a telephonic conversation or face-to-face. Find your adviser here.
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