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My 2024 Tax Lessons

Writer's picture: Mkhululi MojanagaMkhululi Mojanaga

Updated: Dec 25, 2024

For me, 2024 was a big year for learning in personal tax affairs. It is not new information, but just a small shift in perspective that could yield big gains over a lifetime of investing, where the learning came from. The learnings were about simplifying and making practical the general tax information that already exists. Not reinventing the wheel.


The tricky thing about personal finance is that it is a double-edged sword. Everything has a point up to where it is useful, and beyond that, it becomes less so. This is not comforting for many people for look for blanket answers to the question "what is the best investment for xyz?" Tax is also like that.


Here are some of my lessons and I believe everyone can learn and benefit from them:


  1. Accept Tax as part of life. Don't fight it. If you want to earn more money, you are going to pay more tax. It's correlation and causation. Poor people don't pay income tax.

  2. Tax is a Balance of Accounting. Many people actually don't mind paying tax, as long as they do not pay the tax out of their own pocket. If you earn a R1m income, whether you pay the tax yourself, or your employers pays it on your behalf, you are still going to pay the same amount of tax. Get comfortable with this. It'll help you plan your taxes better. It's a good thing that employers collect tax and pay it over to SARS on behalf of their employees, otherwise tax compliance would be a major issue in our country.

  3. South Africa uses a progressive income tax system, meaning the more money you earn per annum, the more tax you will pay. Being on a higher tax bracket is a privilege, not a burden. Embrace it. You have the ability to solve more of your problems than the majority of the country. Don't waste that privilege by chasing ways to pay less tax. If you really want to pay less tax, say no to salary increases, work to actively reduce your salary, or start a business.

  4. Investing in retirement funds is quantitatively useful for balances up to R1 650 000, beyond that, it becomes a qualitative conversation. R1 650 000 is the amount where you get the maximum 1/3 tax-free withdrawal lumpsum of R550 000. Beyond that, the case for bigger bigger retirement investment balance decreases. The main benefit becomes estate planning, not avoiding tax or paying less tax in retirement. Outcomes beyond that can be replicated through discretionary investments. SARS looks at how much you are earning, and not whether those earnings are coming from a retirement investment.

  5. Contributing into retirement investments does not avoid tax. It delays it. The entire balance in your retirement is 'taxable' according to the normal income tax tables once you get to retirement(also refer to above point). So when someone tells you about the tax benefit of contributing to retirement without explaining how tax works when you start drawing down from that investment, they are giving you an incomplete picture. Question why that is the case. Is it a lack of knowledge or do they stand to gain something from bending the facts?

  6. Dividend Withholding Tax(20%) is the only proportional tax type we have. All other taxes are linked to how much money you earn per year. Think about tax on Cash, Bonds, Property income. If your effective marginal income tax is below 20%, you need to focus on growing your annual taxable income. Otherwise you are unnecessarily volunteering yourself into a higher income tax bracket. If your marginal tax rate is above 20%, you become more tax efficient just by investing in instruments that pay dividends.

  7. Whenever you want to do something that seemingly gives you a tax benefit, ask yourself these 2 questions: A: What is the cost of this tax break? e.g. contributing to a TFSA still allows you access to your money, contributing to retirement investments doesn't. B: What is SARS' benefit from this tax break? e.g. it might be to encourage you to be more productive, create employment, thereby improving long term tax base for tax revenue purposes. It might be to reduce the social grants pipeline(if more people retire with enough money in their retirement funds) Many people make decisions with conflicting rationales because they do not ask these 2 simple questions. e.g. why would you prioritize investing in your retirement when you still carry a credit card, overdraft or loan balance?

  8. Prioritizing tax when investing will cost you dearly. Many property investors are guilty on this one, as well as individuals who harvest tax-losses through their investments or contribute into retirement funds. There are also many people would also rather pay interest to banks just to avoid paying tax to SARS. Both have the same net outcome. YOU ARE LEAKING MONEY. Avoid leaking money unnecessarily. Also consider investments that give preferable 'tax treatment', they tend to sacrifice something else, i.e. liquidity and/or growth. You can easily end up with a R5 million pot with 'tax benefits', but is that better than a R20 million pot without any 'tax benefits'? I know which one i would choose...

  9. High earners like using the 30% benchmark for purchasing an endowment. This is a false narrative. Endowments tend to multi asset investments with little liquidity. Why would you want to be invested in cash, bonds and property when you cannot have access to the associated benefits due to features of the investment vehicle? The usefulness of endowments is mainly estate planning, and transferring wealth from yourself to another. Other than that, the actual rule-of-thumb comparison should be the tax associated with capital gains as you are investing for a certain period, usually 5 years.

  10. Plan Your Taxes! No tax outcome should come as a surprise when filing your taxes. You should be planning your taxes in advance. For those married in community of property, it is important that this planning happens jointly. By the time tax season comes around, you should have a high degree of certainty of the outcome. It should be an intentional outcome, not coincidence except for the things that happened unplanned. Knowing your tax bracket will help you plan how you save for any extra income you may receive. e.g. If you are on the 40% marginal tax bracket, you know that you need to set aside 40 cents from every rand you earn.



There you have it. I hope this post helps your tax smut! Are there any other views that could improve how we view and interact with tax? Feel free to jump into the comments. Happy Holidays!

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