National Treasury has published draft Regulations which allow tax free savings products and investments from 1 March 2015.
Licensed banks, long-term insurers, managers of registered collective investment schemes, authorised users (stock-brokers), linked investment service providers (LISPs) and the National Government will be able to offer tax free savings and investments to the public and will be able to administer those accounts on their behalf.
The draft Regulations detail the products that will qualify as ‘tax free investments’, the disclosure requirements for those products, and the process for transferring amounts within a tax free savings account to a different service provider.
Tax free savings products aim to encourage individuals to save and to reduce their financial vulnerability and reliance on debt when there are unexpected shocks to their normal income or sudden large expenses. It also aims to increase the overall level of savings in the economy, which will bring wider macroeconomic benefits.
The Taxation Laws Amendment Bill 2014 includes a new section 12T that defines a ‘tax free investment’ as a savings product, financial instrument or insurance policy that must comply with the draft Regulations.
The effect for the individual is that all their returns on these tax free savings products will be tax free. An individual may contribute up to R30 000 per year in tax free savings and investments, with a lifetime limit of R500 000.