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Tax-free Investments - Coggle Diagram
Tax-free Investments
Exemptions
Rental income
Other income earned
Dividends
Profits from disposals
Interest
What are tax-free investments ?
Administered by a designated institution by the Minister of finance
Must comply with regulations published in the Government Gazette
Defined in section 29A
Income earned is exempt from normal tax
Financial instrument or policy
Limitations
Contribution limits
R36 000 per 12 month period
A R500 000 lifetime limit
Additional rules
Income earned does not affect limits
Any transfers between tax-free investments don't count
Contributions must be cash only
Exclusions
Capital losses on disposals are ignored
No capital gains taxes are payable and losses cannot be claimed
Capital gains tax on disposals are ignored
Who owns tax-free investments ?
Deceased or insolvent estate of a natural person
A natural person
Penalties
Annual contribution limit is exceeded
40% normal tax on excess contribution
If R43 000 is contributed there will be R7 000 in excess, which R2 800 would have to be paid in tax
Lifetime contribution limit exceeded
40% normal tax on excess amount
The excess amount remains part of the tax-free investment and income earned on it remains tax free
If R510 000 is contributed, R10 000 is in excess then R4 000 would be paid in tax