Punitive Tax on Interest Income

When completing my 2022/23 income tax return, it became clear very quickly just how punitive interest income now is from a tax perspective.

The South African Reserve Bank’s BA900 economic returns data shows that household bank deposits totalled R1.7 trillion at the end of July 2023. This is significantly higher than the long-term average – and up more than R80 billion over the year to date. At the same time, retail investor assets held in money market unit trust funds amounted to more than R200 billion, as at 30 June 2023. Furthermore, South Africans are holding on to their bank and money market account investments for longer.

While we cannot do anything now to mitigate this ‘unplanned’ expense for the 2022/23 tax year, we may need to reconsider our financial affairs going into the 2023/24 tax year, especially as you can see from Table 1 that the current amount above which you will be subject to income tax has fallen even further.

The following graph illustrates the faster-compounding benefits on total investment returns by comparing a R1 million investment held directly in the Ninety One Diversified Income Fund versus firstly, a bank account, and secondly, the same Ninety One Diversified Income Fund investment, but this time held via the Ninety One IP sinking fund policy for the 5 years ended 30 September 2023.Source: Morningstar and Ninety One calculations.

Loans Loans Latest News, Loans Loans Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

SA still weighing impact of charging Eskom interestAs the company prepares to split into three, according to a National Treasury official.
Source: Moneyweb - 🏆 5. / 77 Read more »

South Africans can’t afford their homesSouth Africans who took advantage of the interest rate market during the Covid-19 pandemic have received a rude awakening.
Source: BusinessTechSA - 🏆 24. / 61 Read more »

South African rand slips ahead of Powell's speechThe South African rand fell on Thursday ahead of a speech by Federal Reserve Chair Jerome Powell that will be closely watched for insight on the direction of U.S. interest rates.
Source: ReutersAfrica - 🏆 31. / 53 Read more »