This article is designed to answer all your pressing questions about TFSAs in South Africa , these questions can also be immediately answered by our chatbot which can be accessed using this link : https://kukuracapital.com/chatbot-19/. If you have any additional questions about TFSAs , please let us know in the comment section and we will do our best to answer any questions.
1.What are the financial limitations that apply to the TFSA?
You can not invest more than R33 000 per year into your TFSA , and the year is calculated as the period that runs from the 1st of March until the end of February , it follows the same period as the South African tax year. In addition to this you cannot contribute more than R500 000 over your whole lifetime into your TFSA.
2. Can I have more than one TFSA?
Yes you can have more than one TFSA in your name, but the financial limits apply to them collectively. Therefore, if for example if you have two TFSA’s and you contribute R10 000 to one account , your limit for the remainder of the year is R 23 000. You can open an account for your child , and they will be the holder for that account and it will not impact your limits towards your own personal accounts , even though you may be the person contributing toward your childs’ TFSA.
3. What are the penalties if I exceed the limits on my yearly contributions ?
The amount of which you have exceeded the yearly limits will be taxed by 40%.
4. Do I have to contribute the whole R 33 000 per year to make use of the TFSA?
No, you can contribute less than R33 000 to your account. You can contribute any amount that does not exceed the R 33 000, as there are no minimal contributions that are required for this account. However, do note that if you contribute less than the R33 000 the remainder amount does not roll over to the next year and increase your limit for the following year. For example if you contribute 10 000 into your account in 2019 , this does not mean the remainder R 23 000 of your limits rolls over to the next year making your limit R 56 000, your yearly limit remains as R 33 000.
5. Do withdrawals replenish my account?
When you make a withdrawal from your account that amount does not become re-effective in your lifetime contribution, as this is not a revolving account. For example if you invest R20 000 into your TFSA your lifetime limit becomes R480 000 , if you withdraw the R 20 000, your lifetime limit still remains R 480 000.
6. Who can open a TFSA?
Anybody who qualifies as a South African resident. A TFSA can be opened for non-South African citizens as long as they are a resident in South Africa. It can also be opened for minors by their parents or guardians.
7. Can I put any assets into a TFSA?
No, you cannot allocate any assets that exceed the value of the monetary limits which are applicable to the TFSA. Also the following assets cannot be placed into a TFSA:
- Any fund that charges a performance fee
- Individual Stocks
- Commodity ETFs such as Goldetfs
- Currency ETFs
- REITs (this does not however preclude you from including ETF REITs)
8. How do I open a TFSA ?
This can be done through your bank or a broker. You will be required to supply the usually FICA documents :
- ID or passport
- Proof of residence
- Proof of a South African bank account
Some financial institutions may charge additional administration fees.
9. How do I pick a TFSA?
The best type of TFSA is one which allows you autonomy on what you can place int the account, as well as does not charge additional fees and charges that eat into your profits. We have reviewed the different TFSA in South Africa and you can find the reviews using the link: https://kukuracapital.com/reviews-2/ and we have summaries which TFSA win the trophy in this article which can be found using this link :https://kukuracapital.com/category/etf-series/.
10. Why is a TFSA called a saving account?
Perhaps the more applicable name would be a tax free investing account, however the argument behind the name is that the account provides investors with the opportunity to save money, as they will not have to pay taxes on their investments. It is also important to note that a TFSA is not a saving account by the traditional understanding of a saving account. A TFSA does not in itself generate any interest if you put your money directly into the account. You need to place your money into this account via an investment vehicle such as an ETF or unit trust for example.