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Most people by now are familiar with the concept of tax-free savings accounts (TFSAs), but what many may not realise is that a TFSA can form part of your share portfolio. All of the about 40 JSE-listed exchange-traded funds (ETFs) qualify as investment vehicles for TFSAs, and many online stock brokers are offering TFSAs to their clients.
You do have to specify that your investment is a TFSA and your brokerage does have to be able to provide a separate account, as this information has to be provided to the receiver of revenue to qualify for the tax exemption on capital growth, dividends or interest.
Standard Online Share Trading has created new TFSAs for as little as R250 a month, and investors can directly access selected JSE-listed instruments such as property, Top 40-linked baskets, sharia-compliant funds and dividend trackers to build up a diverse and potentially higher-growth portfolio.
Existing online share-trading clients can open a new TFSA, which will simply be added to the list of accounts they already control.
There is an R80 monthly admin charge and the cost of trading in the account is 0.25%, plus statutory charges (although there is no securities transfer tax).
Standard Bank customers who are not online share-trading customers can open a tax-free investment account via their internet banking portal. Purchases are conducted on the 25th of each month (or the first business day thereafter).
The cost of trading in the account is 0.25%, plus statutory charges per transaction, while the monthly fee is a mere R10, inclusive of value-added tax.
Low-cost online stockbroker EasyEquities (easyequities.co.za) offers TFSAs where you can invest in any of the nearly 40 ETFs for just 0.25%, with no minimum amount.
FNB Share Investing has created a tax-free shares account for R300 per month, or a R1 000 one-off lump sum.
Their offering, however, is limited to two ETFs – namely the RMB Top40 and RMB MidCap ETFs. The brokerage fee is 0.6% and a monthly administration fee equal to 0.5% per annum of your total investment value.
An individual is allowed to invest up to R30 000 a year, or R500 000 over the course of their lifetime, in an account that will remain free of interest tax, dividends tax, securities transfer tax and capital gains tax.
WHAT IS AN EFT?
