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Time to increase the tax-free savings caps?

26 January 2016   (0 Comments)
Posted by: Author: Ingé Lamprecht
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Author: Ingé Lamprecht (Moneyweb)

It may still be too early.

As emerging markets fall out of favour and foreign capital flows dwindle, National Treasury may need to step up efforts to encourage local savings.

When finance minister Pravin Gordhan takes to the podium to deliver his Budget speech on February 24, it will be almost a year since tax-free savings accounts (TFSAs) were first introduced to promote saving and to reduce the vulnerability of households.

Currently, individuals can invest up to R30 000 a year in various TFSAs. The lifetime capital contribution is capped at R500 000 and all proceeds are 100% tax-free.

In its 2014 discussion document National Treasury signalled its intention to increase the annual limit on "a regular basis” to take the impact of inflation into account. At the time it said although the lifetime limit could be adjusted upward in future (depending on affordability conditions) it did not intend to increase it by inflation in the short-term.

The landscape

Speaking at the launch of the Nedgroup Investments Core Global Fund, Denver Keswell, senior legal adviser at Nedgroup Investments, said there has been no indication that the contribution caps would already be increased in the upcoming budget.

Keswell said although an increase would be welcomed, National Treasury might want to assess the situation first and will probably only make a decision next year.

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