For those that are being taxed on their interest income consider a contribution to a tax-free investment. Currently, a person may contribute up to R36 000 per annum and any income earned within this product will be free of taxes.
This is especially suitable for a person that is already being taxed on their interest income or that is close to being taxed on their interest income due to receiving an amount of R23 800 for a person under the age of 65 or R34 500 for a person that has attained the age of 65 on any day during a period of assessment. (Even if one turns 65 years of age on or before 28 February during any tax year, the additional benefits may be claimed in the tax period when this age is attained)
The interest exemption has remained at the same amounts as mentioned above and will seemingly not increase anytime soon. This is as government wants people to invest in tax free funds. Each individual taxpayer has a lifetime limit of R500 000.
Another good strategy would be contributing an amount of R36 000 for a minor or major child if the intention is assisting the child later. If done early for a minor child, they could keep it many years during their working life earning exempt income and without the parent being taxed on this income. It could even serve as a college fund. Remember that there is a lifetime limit of R500 000.
Also remember that there are no carry overs so if in the preceding year no amounts were contributed, this amount could not be caught up in the subsequent year or a penalty of 40%, may be imposed on the contributions in excess of R36 000. Having various investments for the same individual is also acceptable providing that the investment amount does not exceed the amount as above.
Also remember that the exemption applies to South Africa so if assets are purchased in a foreign country, the foreign tax authorities may impose a tax on the income sourced within their country. The amount would then not be subjected in SA taxes again if in a tax-free investment vehicle. (Residents are taxed on their worldwide income with a credit for foreign tax credits (Section 6quat))
Withdrawals may be made from these tax-free investments without tax consequence and any replacement would be considered as part of a new contribution with the above R500 000 lifetime limit.