FAQ - Tax-Free Savings Account

Why open a tax-free savings account (TFSA)?

Tax-free savings accounts present an excellent opportunity to grow early savings towards long term goals for a wide range of South Africans no matter the stage of their working life; young professionals, self-employed individuals, retirees, and parents on behalf of their children all stand to benefit from investing in a TFSA to grow their wealth. Not only do you earn compound growth on the tax saved by opening a TFSA, but your decision to invest your savings means you also get your full investment return without being taxed on that growth. 

As a leading investment manager in South Africa, 10X Investments aims to empower our customers through secure long-term strategies that help them reach their financial goals. With financial management products to grow your wealth that meet a range of investment needs, we are proud to possess a track record of consistently superior returns, low fees, and a robust, diversified investment portfolio. 10X Investments has a diverse selection of funds to meet the savings needs of investors and savers at any phase of their professional life. We are here to empower you to grow your wealth and invest in your future smartly. Keep reading to learn more about opening a TFSA and why 10X Investments offers the best avenue for investing your savings.

What is a tax-free savings account? 

A TFSA is a type of savings account that doesn’t have tax implications on the contributions you make, the interest earned, or dividends received. Think of your TFSA as a wrapper, under which any number of investment funds might sit. For instance, you might want passive index trackers or actively managed funds, or a combination of the two. By including a fund in your TFSA, you are simply nominating that any money invested (up to the legal limit of R500,000 and at a maximum of R36,000 per year) falls under the pertinent TFSA legislation.

What is the difference between a savings account and a tax-free savings account? 

A regular savings account offers interest on the funds you deposit, but these interest earnings are subject to tax. With a tax-exempt savings account, you are able to grow your savings without taxation, with interest and returns on your TFSA funds being tax free. Regular savings accounts also tend to be connected to lower risk, lower return investment vehicles, whereas with a TFSA you typically have more control over where your money is invested.

Should I put my money in a tax-free savings account?

Yes! Your savings grow tax-free when invested in a TFSA, and you are able to withdraw your funds at any time without paying tax on the withdrawal. Better yet, combine the benefits of a TFSA with 10X’s consistently high returns and low fees and your savings could make a huge impact on your future.

How much interest do I earn on a tax-free savings account?

This depends on where you invest your money, but let’s say you invest R3,000 per month in a 10X TFSA account and the 10X Your Future Fund, until you reach the lifetime contribution limit of R500 000. The investment earns 11% per annum and has an equal return split between income, dividends, and capital gains. At the end of the (roughly) 14 years of your investment, you would get R2.26 million rand out. Of course, leaving that money invested for longer would take advantage of further compound interest on a larger sum, and therefore earn you even more over time.

What are the rules for tax-free savings accounts in South Africa?

TFSAs have an annual contribution limit of R36 000 per tax year, and a lifetime limit of R500 000. Exceeding a contribution limit results in a 40% penalty from SARS on the excess you contributed. You can open as many TFSAs with as many underlying fund structures as you want, but the same contribution limits apply.

How much money can I keep in my bank account without tax in South Africa?

For any account where you save money and earn interest (e.g. bank account, medical savings account) SARS grants you exemption from tax on interest income up to R23,800 for people up to the age of 65, and R34,500 for people over the age of 65. Your TFSA can grow your savings in accordance with your contributions and the growth on your fund investment, but you are limited in terms of your contribution – your contributions may not exceed R500 000 total. Once you have reached the lifetime contribution limit, no further investment is permitted, but you are not taxed on any growth in the account.

What is the maximum tax free savings account in South Africa?

The maximum amount you are able to invest in your TFSA is R500 000, with maximum yearly payments being R36 000 (totalling R3 000 per month for approximately 13 years).

Tax-free savings account limit per year

The monetary limit to how much you are able to contribute to your TFSA per year is R36 000, and the lifetime contribution limit is R500 000. However, you are able to reinvest your returns on your TFSA without this counting towards your annual or lifetime contribution limits. For example, if you reach the R36 000 annual contribution limit but receive a return on investment of R1 000 that you reinvest into your TFSA fund, you will have accumulated R37 000 total – but the R1 000 reinvestment will not count towards your contribution limits or incur the 40% penalty on excess contribution.

There are a number of reasons for SARS’ limits on contributions to TFSAs, due to the need to balance incentivised financial freedom with the broader economic considerations in South Africa. Governments need to impose limits on tax free contributions in order to manage the tax revenue loss and ensure greater financial stability while providing the opportunity for individuals to grow their wealth without tax implications. 

Additionally, contribution limits ensure that TFSAs remain accessible and beneficial for a range of taxpayers, which speaks to the central goal of the tax-free savings account’s introduction in South Africa – to encourage more South Africans to prioritise saving. Limits to contributions also help individuals save and invest more consistently, as having a set annual limit promotes regular saving towards long-term goals.

The 10X TFSA requires a minimum lump-sum contribution of R1 000, or a minimum monthly contribution of R500. You are able to contribute to your TFSA ad hoc, or on a monthly, quarterly, or annual basis with as much flexibility as you’d like. You can also choose to stop or change your contributions as and when you need to.

Can you have 2 tax-free savings accounts?

There is no limit on the amount of TFSAs you can open. However, it is important to note that regardless of how many accounts you have, the same contribution limits apply across all of your accounts. 

What are the top 3 mistakes you must avoid in a TFSA?

There are a few best practices when it comes to investing in a TFSA:

  • Keep close track of how much you contribute
  • Make the most of your contribution by investing the full annual limit
  • Diversify your investments in your TFSA by varying the composition of the underlying investment vehicles (funds), and if necessary, opening more than one TFSA to take advantage of different investment approaches and dilute your risk

Who has the best tax-free savings account in South Africa?

Well, we’re going to say us, of course! 10X Investments’ TFSA stands out among other financial institutions’ savings and investment offerings because our funds consistently outperform market benchmarks and we are committed to keeping fees as low as possible – which means more money for you at the end of the day.

Tax-free savings with 10X Investments

Choosing to invest your capital in a TFSA with 10X Investments is an excellent strategy for confidently growing your money while minimising tax implications. Unlike regular savings accounts which are taxed on interest earned, TFSAs present the opportunity for compound growth on funds that would otherwise be taxed in a traditional savings account. The compound growth factor especially makes TFSAs a favourable option for individuals aiming to see long-term growth on a regular savings investment. 

It can be difficult to know exactly how to save and invest your money – in acknowledgment of this, at 10X we aim to keep the process simple. Once you’ve decided you want to open a TFSA with us, the next step would be choosing a fund for your investment. We offer a range of funds to suit your specific investment needs – for example, the 10X Your Future Fund is an optimal choice if you’re looking for long-term capital growth with cost-effective exposure to a combination of local and international investments. With a workable ideal time horizon of 5 years and beyond, and 12.2% annualised returns since inception, the 10X Your Future Fund is a popular choice for its cost-favorability with maximised long-term growth.

Whatever your investment needs are, with 10X Investments you will find a fund that equips you to reach your savings goals and grow your wealth towards a comfortable future. The sooner you start investing in your TFSA with 10X, the sooner you’ll experience compound growth in your savings; apply online or speak to one of our consultants to set up your TFSA today.

Best tax-free savings account products in South Africa

10X Investments is a leading investment management company in South Africa. With consistent market outperformance, highly diversified investment portfolios, and fees kept as low as possible (without any platform, advisor or penalty fees), your TFSA with 10X gets you as much return on your savings investment as possible. Lower fees means more money for you and your investment, and low fees combined with our consistently superior returns means your long-term savings have the best chance of significant growth with 10X Investments. 

At 10X, we believe that the best strategy for the growth of your tax-free savings account is to keep it simple. Low fees and superior returns, combined with a wide choice of local and international funds covering all risk profiles, flexibility with investing across a diverse portfolio, and our tried and true, market-leading asset allocation and valuation model ensures the growth of your investments. The trust you put in us is not blind faith, either – we keep things transparent by providing clear, easily digestible reports so that you have all the data on the performance of your chosen TFSA fund, and all the information you need to make informed decisions 

Applying for a tax-free savings account (or any other investment product) with 10X is a quick and easy online process. Simply click apply online, then navigate to our online investment portal and choose the product you would like to sign up for. It's just a matter of following the instructions once you get there. Should you need to save and revisit your application at a later date, you will be able to log in and pick up where you left off. You can also get in touch with us, and a consultant will be happy to walk you through the signup process. Unsure which 10X fund is best for your TFSA? Our highly-experienced consultants are available to discuss your circumstances and needs when selecting the fund most ideal for your savings and investment goals.

Open your tax-free savings account with 10X

A TFSA offers a flexible yet sturdy savings investment option, with the considerable benefit of savers not being taxed on the growth of their investments. The lack of taxation on your savings contributions (as well as the lack of taxation on the growth of the funds) held within your TFSA creates an opportunity for efficient compound growth of your money. 

TFSAs provide flexibility, as there is no commitment on your part to make future contributions – you are able to contribute as and how you like, within the annual and lifetime contribution limits. Invest your savings in a 10X fund and enjoy consistently performing funds, superior returns on your investment, low fees, and a highly diversified investment portfolio.

10X Investments is an authorised Financial Services Provider (FSP number 28250). The content herein is provided as general information and is not intended as nor does it constitute tax, legal, investment, or financial advice as defined by the Financial Advisory and Intermediary Services Act, 2002.

The 10X Living Annuity is underwritten by Guardrisk Life Ltd.

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