Tax is complicated, so it’s a good idea to ask an expert to help you make the right choices, according to Jeanette Marais. File Image: IOL
Tax is complicated, so it’s a good idea to ask an expert to help you make the right choices and make sure that you pay only the tax you need to, according to Jeanette Marais, deputy chief executive at MMI Holdings.

If you earn more than a salary, if you have your own company, want to invest money overseas, or if you own more than one property, it’s better to ask an expert to help you with your taxes, says Marais. Did you know that you may have to pay tax if you inherit money or assets? And property tax can also get tricky.

“You obviously want to pay as little tax as possible, so it is important to understand what kind of taxation you're dealing with, what the specific tax implications are, and how to go be compliant,” she says.

“It’s not about tax evasion but about making clever choices. There are various products and tools you can use to help you save on tax.”

First, says Marais, there are tax-free savings accounts.

“If you invest in a tax-free investment, you can invest R33 000 a year, with a maximum of R500 000 over your lifetime, without being taxed on the growth or the return. It’s available to all South Africans, regardless of age, and your financial adviser can help you with this.”

Marais say that you’ll never pay tax on this money, not even if you withdraw it early. However, you should keep in mind that it's always better to stay invested and let your investment grow and benefit from compound interest, like with all other investments. If you withdraw from a tax-free investment, you cannot reinvest the money for further tax benefits.

Second, Marais says you should set up a retirement annuity (RA), as your contributions are tax-deductible, within limits. To make the most of this opportunity, you can invest up to 27.5 percent of what you earn in an RA, and deduct it from tax, limited to R350 000 a year. “For example, if you invest R1 000 in your RA every month, and your tax rate is 31(percent) of the R12 000 you have invested during the tax year from the SA Revenue Service.”

Not only are you saving with tax, you are also saving for your retirement, while your money grows tax free. Think about how quickly your money can grow if you reinvest whatever you get back into your retirement annuity, and then deduct it from tax again the following year. It’s the snowball effect.