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SauRoN

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Everything posted by SauRoN

  1. Hello all. @Thor (no idea who is on here if not the same but I would imagine everyone else knows) told me to pop in here and ask the question in the open forum based on this discussion we had on MyBB. https://mybroadband.co.za/vb/showthread.php/932070-Investing-in-Stocks-Shares?p=20955362&viewfull=1#post20955362 Essentially I want to know if the logic and understanding of the CGT / Interest exemptions are correct to facilitate the following. 1. Invest in an interest bearing investment until you hit the R23,800 threshold (So R238,000 at 10% by example). 2. Use that interest to fund your normal investment account until you reach the CGT exclusion R40,000 (this is the one I'm not sure whether I understand it correctly or not). 3. Take that R33,000 of that R40,000 to fund your TFSA accounts and the other R7000 as a nice bonus. 4. Fund your TFSA for 15 years or whatever to reach the maximum and basically be near investment tax free until then outside of dividends. Am I smoking the good crack?
  2. SauRoN

    CGT / Interest exemption from SARS vs TFSA

    Where did I ever say I would take money out of the TFSA/TFIA to fund the others? It was quite the opposite and the others need to fun the TFSA/TFIA because you cannot take money out of it (or rather you shouldn't) due to the negatives. But your last paragraph is more in line with what I'm getting at and that is that you should be using these things in parallel if anything, while most people bark up the tree of TFSA first uber alles which doesn't make sense as a one-size-fits-all solution as nobody has only longterm goals. And as such if you don't have the money to "over fund" the TFSA then one has to ask why you are putting it in the TFSA in the first place if you don't have a tax implication to begin with due to lower investment volumes.
  3. SauRoN

    CGT / Interest exemption from SARS vs TFSA

    Can you explain this 18% calculation? I was understanding it rather that the first R40k (as in profit from the sale of your shares) is tax free? Which is why I came here to ask the question as it wasn't clear if it's the same as the interest exemption or not. Not arguing that the TFSA isn't a great vessel, so long as you are happy to leave the money all in there and don't touch the capital until you are well into retirement. It's purely a longer term investment strategy...but what about the short term?
  4. SauRoN

    CGT / Interest exemption from SARS vs TFSA

    And a fair example it is. However it is an either/or example only. Where is the example when the two are combined with contributions that go beyond the TFSA limits over the period? More so where is the example of money pulled out of either fund and the net result of it not being able to returned to the TFSA portfolio? Are you starting to see why the TFSA isn't a one-size-fits all solution especially when funds are limited and you don't just assume that everyone will cap it instantly? For that matter if that graph is the gospel you are going to invest by then you need to add a third alternative of throwing all your longterm savings into an RA at 27.5% and using the tax deductions from that to fund the TFSA to really see the highest benefits. It really becomes a "how long is a piece of string" thing that will vary from application to application.
  5. SauRoN

    CGT / Interest exemption from SARS vs TFSA

    It is very simple to understand and there is no problem understanding that. What you fail to acknowledge is that there is an inherent disadvantage to all the money being locked into the TFSA otherwise the advantage of it falls away. Income that cannot be touched until a given period of time has no benefit at all when that income is required in the shorter term to be used otherwise. Different goals have different requirements. There isn't a one size fits all for everyone, yet you punt TFSA exactly as such. And still the CGT exemption question hasn't been answered or corrected to verify that it is accurate or not.
  6. SauRoN

    CGT / Interest exemption from SARS vs TFSA

    Sorry maybe I should have specified that there isn't 250k to start out with here and it's rather that of an average wage earner at a couple of grand a month. Let's say the TFSA limited about of R2750. But either way even the starting point is irrelevant as the relevance of the question is rather the point at which you are making R23800 a year in interest and/or the the CGT exclusion value and how do you plan for it. When you've got 250k sitting in either of the three styles of funds it's already way too late. This question relates to when you are at zero or at the very least far from it being enough to become a tax burden. The entire concept is how do you plan your investment to be tax free or rather tax efficient for as long as possible by applying the correct logic when starting out and then whether this approach is correctly understood from a SARS perspective, possible and of course also legal. Also it's not six months but annual. So you say have money only in a CGT "friendly" investment until such time as it becomes tax bearing. When that happens you make use of your tax exclusion to withdraw the money for that Tax Year and then start funding the interest bearing account. Now you start funding the interest bearing account until such a point where there is a tax issue or rather you start hitting the TFSA R33,000 limit and you start investing in that. Or you take a nice annual income bonus and fund the TFSA with the rest. Or you just keep investing the overflow and pay the tax. Either way this is not aimed at someone who has too much and can't possibly escape the tax but rather someone still in the wealth building phase. You could of course do all three options in parallel as well depending on your goals. My deepest question is still unanswered though and that's whether the CGT exclusion works the way I think it does. The simplest math would be to start with the interest bearing account that has a static interest rate that you could limit the annual balance to an almost exact figure of interest and then fund the rest from there. Then you could take that Tax free sum combined with the monthly contribution you were making to it to fund your CGT based portfolio. TLDR; This isn't a get rich quick scheme and doesn't relate to six months. It's about tax year to tax year over twenty or more years and using a base input of a couple of thousand a month to build wealth. If I had half a bar to invest I probably wouldn't be asking this here and just pay a tax dude to do it for me.
  7. SauRoN

    CGT / Interest exemption from SARS vs TFSA

    Who is this "they" you are referring to? And also how is it poor planning when the very concept of keeping it out of the TFSA is for the reasons of planning to NOT take it out of that and therefore affect it negatively but instead to keep it in a regular account while dodging the tax? So it's not poor planning at all, it's the exact opposite. You keep it outside the TFSA because you planned for it and it needs to be pulled out or accessed at some point in the next 20 years. This IS the budget and saving mechanism. Also how is the compound interest going to be any different if the exact same assets (outside of the interest account of course) would be purchased in the very same values in the very same time lines in different accounts. Tax Free is Tax Free, whether wrapped in a TFSA or alternatively through an exemption. Percentages and compound interest don't magically change because of the container they are held in. So I can only imagine you are either Hamster or HavocXphere then arguing the very same point while the entire idea of posting here was to get an alternative view. Either way the answer still hasn't been provided whether it would be correct or not in that everything would be Tax Free using this method until the TFSA cap is reached.
  8. SauRoN

    CGT / Interest exemption from SARS vs TFSA

    1. Would be an account like Money Market that strictly pays out X amount of interest. Therefore not equity based and not an underlying value of an asset. 2. Would be the profit from the difference between purchasing an equity and selling it again after the longer term and the profit there of. Dis-chem would fall under this if you kept it long enough for it to qualify as CGT.
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