In the process of claiming seeded retirement funds under the two-pot system from 1st September, beneficiaries should be aware that a 10% seeding is applied to a maximum of R30,000. The new system has processes which will cause delays. 

Admin delays

When initiating the withdrawal process, beneficiaries should see the seeded amount available. Some fund administrators may not be ready to reflect this in your account on the 1st September. So one possible delay will be the admin process. The big difference will be found between funds which are digital verses those that are manual.

Tax delays

However, beneficiaries should note that the seeded amount is subject to tax implications based on their marginal tax rate and any potential SARS directives for withholding taxes. Beneficiaries should be prepared for potential delays related to tax withholding on the seeded amount and plan accordingly for the impact on their overall retirement fund withdrawal process.

Understanding the specifics of the 10% seeding feature and its tax implications can help beneficiaries make informed decisions about accessing their retirement funds under the two-pot system.

In response to the evolving landscape of tax administration, the South African Revenue Service (SARS) has introduced an auto-assessment process aimed at simplifying the tax filing experience for individuals. Under this system, SARS utilises taxpayer data to automatically generate an initial tax assessment based on the information available to them. While this can expedite the filing process, it is essential for taxpayers to understand that the responsibility for the accuracy and completeness of their tax return ultimately rests with them.

Your return is your responsibility

As a taxpayer, it is imperative to recognise that even if you have been auto-assessed by SARS, conducting a thorough review of your tax return is crucial to ensure that all income earned during the tax year is correctly declared. This diligent approach is essential to avoid potential penalties, fines, or audit triggers that may arise from inaccuracies or omissions in your tax submission.

Check the information carefully

When validating your tax return, consider examining all income sources, verifying deductions and credits, maintaining organised records, seeking professional advice, and utilising tax-filing software. These practical steps can help you verify the accuracy of your return, enhance compliance with tax regulations, and potentially optimise your tax liabilities.

Work with the system

By remaining proactive and vigilant in reviewing your auto-assessed tax return, you demonstrate a commitment to fulfilling your tax obligations responsibly and ethically. Remember, while technology has transformed the tax assessment process, your active participation in validating your tax return is essential to ensure financial transparency and compliance with tax laws.

Borrowing more than 100% on a home loan, also known as a no-deposit or high LTV (Loan-to-Value Ratio) loan, may appear attractive to South African homebuyers seeking to reduce initial expenses. However, this approach carries substantial risks and financial consequences that should not be underestimated.

The more you lend the more you pay…

The lender makes money by charging interest over time. If you can’t comfortably afford the repayments then you are borrowing too much. In the case of a car when you opt for a balloon payment at the end of the term you probably have over extended your purchase by that amount.

Home loans are no different…

Taking out a loan exceeding the property’s value not only increases the risk of negative equity if property prices fall but also leads to higher interest payments over the loan term. For instance, consider a R500,000 property where you borrow 100% of the value at an interest rate of 9%:

– Over 20 years, your monthly repayment would be around R4,533. (Total repayments R1 087 920). – Double the loan. 

– Over 30 years, your monthly repayment would be approximately R4,026. (Total repayments R1 449 360). Triple the loan. 

Do your home work

Extending the loan period from 20 to 30 years reduces the monthly installment but results in significantly higher interest payments in the long run. Before opting for a high LTV loan, carefully assess the long-term financial implications to ensure you can comfortably manage repayments and shield yourself from potential financial stress in the future. 

A Government of National Unity and a household are like two sides of the same coin when it comes to managing resources efficiently. Picture this: different political parties setting aside their differences to work together for the common good – that’s unity in action. Similarly, in a household, family members need to team up and use their strengths to handle the financial affairs collectively. Keeping on the same page by spending wisely, reducing wasteful consumption.

Budgetting

Take budgeting, for instance. Just like the government needs to decide where to allocate funds for public services, a family needs to figure out where to spend money on necessities like groceries and bills while setting some aside for savings. It’s all about making those rands count!

Planning ahead

Then there’s planning for the future. Whether it’s investing in infrastructure for the country’s development or saving up for retirement and the kids’ education, both the government and a household need to think ahead and make smart choices.

Contingencies

And let’s not forget about dealing with unexpected expenses. Just as a Government of National Unity needs to address crises and emergencies, a family needs to have a rainy-day fund to tackle unexpected bills or repairs.

So, whether you’re running a whole country or just a household, teamwork, smart money management, and planning for the future are crucial for success and well-being.

Preparing and submitting your tax return in for the 2014 filing season involves several steps. You would have noticed your various tax certificates being emailed to you from various institutions which should be kept in a file in preparation of your next tax submission. 

The dates for the 2024 Filing Season are:

• Individual taxpayers (non-provisional): 15 July 2024 to 21 October 2024
• Auto-assessment notices: 1 – 14 July 2024
• Provisional taxpayers: 15 July 2024 to 20 January 2025
• Trusts: 16 September 2024 to 20 January 2025

Here’s a concise guide to help you:

Gather Documents: Collect all necessary documents, such as IRP5/IT3(a) certificates, medical aid certificates, retirement annuity contributions, and other relevant financial documents.

Register on eFiling: If you haven’t already, register on the South African Revenue Service (SARS) eFiling portal. This platform allows you to submit returns, make payments, and access tax-related services online.

Auto Assessments: SARS may issue an auto-assessment based on data from employers, financial institutions, and other third parties. If you receive an auto-assessment:

• Review Carefully: Check the details against your records for accuracy.
• Accept or Edit: If the assessment is correct, accept it on eFiling. If there are discrepancies, make the necessary corrections and submit the updated return.

File Your Return: If you do not receive an auto-assessment, complete your return on eFiling:

• Fill in Details: Enter income, deductions, and other relevant information.
• Validate and Submit: Validate the return for errors, then submit it.

Respond to Queries: SARS may request additional information or clarification. Respond promptly to avoid penalties.

Payment: If there is tax payable, ensure you make the payment by the due date to avoid interest and penalties.

Using eFiling and keeping thorough records can simplify the process. Always verify auto-assessments for accuracy to ensure a smooth tax season.

From the 1st September 2024 your retirement fund will be restructured into three components designed to allow you access to a portion without having to leave your employer. Contributions in the future will be split into two pots.

The Vested Component

Your total retirement fund as at the 31st August 2024 will vest and be made fully available to you as before where you can:

Stay a paid up member

Withdraw and take the cash 

Transfer to another fund

The Savings Pot

10% of the vested fund up to R30 000 will be transferred across to a Savings account which will start from the 1st September 2024. One third your future retirement contributions will be allocated to this savings account with the following conditions:

Withdraw a  portion or in full

Once a year

A minimum of R2000

A tax directive will be applied and the amount is added to your taxable earnings for the tax year. SARS will take any outstanding taxes owed before releasing remainder of the withdrawal. 

The Retirement Pot

The two thirds of your future contributions from the 1st of September will be invested in a retirement component which will only be available as a pension for you at retirement. 

What you should do

Ideally, you should leave your vested, savings and retirement components alone as the more you save the better your pension will be. The Savings component is only there for emergencies as a last resort. 

When you leave your employer don’t cash in and pay tax. Rather preserve and keep the tax in your investment which will make a huge difference to the future value. 

Elections and financial planning might seem like they’re from different worlds, but both involve making important decisions that shape the future. In elections, we choose leaders who set policies affecting everything from education to healthcare. Voting is like investing in the future we want to see, requiring us to look at candidates’ plans and past actions.

Personal vs. Collective Choices

On the flip side, financial planning is all about personal choices. It’s about setting your own financial goals, figuring out where you stand, and making smart moves with your money. Unlike the every-few-years cycle of elections, financial planning is a constant process. You’re always tweaking your budget, adjusting investments, and planning for things like retirement or buying a home.

Different Focus, Similar Skills

Voting is about what’s best for the community, while financial planning focuses on what’s best for you and your family. Both need you to think critically and plan ahead. Elections happen on a set schedule and are often influenced by current events, but financial planning is a daily task that changes with your life circumstances.

Balancing Act

in the end, both elections and financial planning are crucial for shaping a better future. Elections help steer the country in the right direction, and financial planning ensures you’re prepared for whatever comes your way. By staying informed and proactive in both areas, you can help build a stronger community and secure your own financial health.

The surge in the stock markets ( S&P new record) this year amidst weak economic fundamentals of high inflation and cost of debt, begs the question..Is it time?

What is the strategy?

The adage “Sell in May and go away” is a well-known investment strategy that suggests investors should sell their stocks in May and reinvest in November to avoid the historically weaker summer months in the stock market. This strategy is based on the belief that the market tends to underperform during the summer months.

History

The origins of this saying date back to the 18th century in England when investors, predominantly wealthy aristocrats, would leave the city for the countryside during the summer months, leading to lower trading volumes and potentially weaker market performance.

The Evidence

One example supporting this strategy is a study by the “Stock Trader’s Almanac,” which found that historically, the period between May to October has shown lower average returns compared to the period between November to April.

S&P 500 no exception

Another example is the performance of the S&P 500 index over the years, which has shown mixed results for the “Sell in May and go away” strategy, with some years seeing significant market downturns during the summer months.

Consider it collectively

While the “Sell in May and go away” strategy is not a foolproof method for investing, it is essential to consider historical trends and market conditions when making investment decisions. Investors should conduct thorough research and consult with financial advisors before implementing any seasonal investing strategies.

Ensuring that these common oversights are  taken care of in your financial planning will considerably improve the outcomes. 

Beneficiary Designation for Pension Fund

One critical area is failing to designate a beneficiary for your pension fund benefits. Trustees typically determine beneficiaries, prioritizing dependents. However, navigating complex beneficiary rules and ensuring the desired recipients are accounted for can be challenging.

Inclusion of RA Contributions in PAYE Deductions

Additionally, neglecting to include Retirement Annuity (RA) contributions in your Pay-As-You-Earn (PAYE) deductions can affect your take-home pay. Despite the opportunity to boost monthly income, adjusting deductions may require navigating administrative hurdles and understanding tax implications.

Nominating a Child as a Beneficiary

Moreover, nominating a child as a beneficiary presents challenges as minors lack legal capacity for financial matters. Policies involving minors often involve legal guardians, introducing complexities in ensuring the intended benefits reach the child as intended.

Attending to these areas in your planning can make a big difference to its effectiveness and efficiency. 

In the article “Hungry and Powerless: Households battle to access basic necessities” published on April 23, 2014, Times Live highlighted the enduring struggles faced by households in obtaining essential provisions. The piece featured the daunting challenges families encounter as they contend with keeping up with the cost of living including the huge price of electricity, painting a stark picture of their daily struggles. The trend amongst households across the board is to lean towards debt to get through day to day living. 

The huge problem in motion is that the dependency on debt takes away savings which creates a serious problem into the future. The only way to improve standards of living is to build savings. You cannot create financial freedom without savings. 

The current crisis is eroding  households’ living standards making them poorer over time as rising debt weakens their balance sheets. 

Dependency on state subsidies and grants is a ‘hand out’ which fuels poverty. What is needed is a ‘hand up’’ found in job creation. 

Amongst many options, focusing on building and maintaining infrastructure is a ‘no brainer’ for an ailing economy. Jobs are created as the country is upgraded. The new income boasts taxes which allows for further growth and improvements. More tax in the coffers lessens tax rates which leaves more behind for households.

With the right vision and management, South Africa, with all its resources, can turn the corner and significantly improve the standard of living for everyone. We shouldn’t be struggling with essentials. Instead we should have extras for a better quality of life.