Tax Free Investment

A Tax Free Investment (‘TFI’) (also known as a Tax Free Savings Account) allows individuals to invest free from capital gains, dividend and income tax, provided that they remain within the stated annual (R33 000) and lifetime (R500 000) contribution limits. The tax exemption is provided by the recently introduced Section 12T of the Income Tax Act.

A TFI allows you to grow your investments free from any taxation.

No tax on capital gains, dividends, interest or other income from your TFI. Unlike most other investments, you will therefore not pay tax on the growth of your investment or when you withdraw any of the proceeds.

South Africa has a very low savings rate and the Government wants to encourage more savings to ensure that more individuals are financially independent at retirement.

Yes, you can withdraw money at any time. You have unrestricted access to your TFI. However, take note that withdrawals from your TFI account do not increase your annual or lifetime contribution limit.

Withdrawal requests are generally processed within 48 hours.

You can either contribute a single lump sum or a recurring monthly amount through a regular debit order.

You can invest from as little as R500 per month via debit order or a minimum of a R1 000 once-off lump sum.

You can contribute up to a maximum of R33 000 per tax year. A lifetime limit of R500 000 applies, which would take approximately 15 years to reach if you contributed the maximum amount each year.

A tax year starts on 1 March and ends on the last day of February of the following year.

No, your contributions to a TFI account do not qualify for any tax deductions.

The R500 000 limit only applies to your lifetime contributions into a TFI. The value of your TFI may exceed R500 000 after growth due to capital appreciation, dividends, interest and other distributions.

The South African Revenue Services will levy a 40% penalty tax on all contributions over the prescribed limits.

It is your own responsibility to ensure that the sum of all your contributions across all your TFI accounts remain within the annual and lifetime contribution limits.

It depends if you have reached any of the contribution limits. For example, if you have invested R33 000 during a tax year, and then withdrew some or all your savings, any further investment during that tax year will be liable for the 40% penalty tax. In other words, withdrawals from your TFI account do not increase your annual or lifetime contribution limit.

No. You can hold a TFI account at more than one qualifying institution. However, take note that your annual and contribution limits will apply to the sum of all contributions made to all the TFI accounts that you hold.

Yes. Investors are permitted to transfer any value of their TFI from one service provider to another. Transfers between TFIs will not count towards the contribution limits.

No. Current non-TFIs must be converted to cash before they can be transferred to a TFI account.

Yes. Parents, grandparents or guardians can invest in a TFI for a minor child. Your savings on behalf of minors may be subject to donations tax should it exceed your R100 000 annual donations allowance.

No. Any funds withdrawn from a TFI account must be paid into the bank account of the TFI holder.

No. Investment income earned on your TFI account, like capital gains, dividends and interest, are automatically reinvested into your account.

No, Creditors may attach your TFI account if they obtain a court judgment against you.

You may nominate beneficiaries to your TFI account and if you do so, even though your TFI will form part of your personal estate on which estate duty will be due on death, no executor’s fees will be payable on your TFI account asset.

No. TFIs are only available for South African resident individuals. Trusts and companies are not eligible.

The underlying investment of the Mosaic Tax Free Investment offering is the Mosaic Flexible Prescient Fund, a Financial Services Board registered Collective Investment Scheme. See the fund’s Minimum Disclosure Document for more information.

The Mosaic Flexible Prescient Fund is a flexible asset allocation portfolio with a primary objective of generating sustainable capital growth for investors. See the fund’s Minimum Disclosure Document for more information.

Not necessarily. The Income Tax Act already provides an annual interest exemption of R23 800 per annum (R34 500 for persons 65 and older). Additionally, there are no dividend or capital gains tax applicable to cash investments. Therefore, it is not necessarily sensible to use a TFI for a cash investment as taxpayers are already eligible for a partial tax exemption on interest income without the use of a TFI.

You simply complete our application form and provide the necessary FICA documents. As easy as that.

The Mosaic Flexible Prescient Fund is regulated by the Financial Services Board in terms of the Collective Investment Schemes Control Act. Nedbank serves as trustee, KPMG as auditor and Prescient as the administrator of the fund. See the fund’s Minimum Disclosure Document for more information.

You will receive your investment statement per e-mail. You can also access the Minimum Disclosure Document of the underlying fund at any time.

There are no initial fees or annual administration fees apart from the normal investment management and direct investment charges incurred by the underlying collective investment scheme. See the fund’s Minimum Disclosure Document for more information.