Wishnia's Word

March 2014

Hi, I hope your year is going well and you are on track with your goals. This is my daughter Jodi, styling with Bill and Chelsea Clinton while I'm at the salt mines! .

The Budget Speech & Your Financial Planning

No change to the Income Tax, VAT and CGT inclusion rates neither were there changes to the donations tax or estate duty rates. The impact of bracket creep has been catered for by favourably adjusting the tax brackets giving the balance of the savings to lower income earners.

The tax-free amount in respect of withdrawals (applied once per lifetime per individual) has been increased from R22 500 up to R25 000.

The tax-free amount in respect of retirements has been increased from R315 000 to R500 000 (applied once per lifetime, per individual, with all withdrawals and retirements aggregating and accumulating).

The tax preferred savings vehicle referred to in the retirement reform technical discussion papers will be implemented this year.

The basic principle is that each individual will be able to contribute up to R30 000 per annum after tax money into the vehicle. All the growth will be tax-free and the proceeds will likewise be paid tax free.

The maximum that may be invested will be capped at R500 000 per lifetime. It is envisaged that a variety of underlying asset classes may be used in this investment vehicle.

The premiums on individually owned life policies are not tax deductible and the proceeds are tax free. This principle is to apply to all long term policies owned by individuals with no exceptions. This follows on from last year's decision that income protection policy premiums would no longer be tax deductible.

Clarity on "key person" policies: National Treasury intends only those policies where the employer will suffer a financial loss if the key person should die, become disabled or suffer a severe illness should be eligible for a premium tax deduction. Contingent liability policies are not covered by this definition.

Is your retirement annuity still exempt from estate duty?

Yes, this makes a retirement annuity a very valuable financial planning tool. Not only are the proceeds exempt from estate duty on death, but any growth in the fund does not attract income tax, capital gains tax or dividends withholding tax.

Dividends

When you buy equities offered by a company, you are effectively buying a portion of the company. Dividends are an investor's share of a company's profits, paid to him or her as a part-owner of the company.

What are the tax implications on divorce?

A client who is awarded a lump sum in terms of a divorce order may either transfer the lump sum to another approved retirement fund, in which case such a transfer will be tax-free, or take the lump sum in cash, in which case it will be taxed in terms of the lump sum withdrawal tax tables.

Tax-free lump sums on retirement?

The tax free portion for lump sums has been increased from R 315 000 to R 500 000.

Let's meet to do an annual review to ensure that your financial planning is in line with your needs.

Network Corner : Please feel free to contact the following people for a quote or consultation

Bernie Smith
Bookkeeping Services
083 345 4217
berniesm@mweb.co.za

Brian Baxter
Architectural Drawings
082 411 6466

Thank you for your valued business and referrals.

Cheers
Stephen

Certified Financial Planner ®
Postgraduate Dip Fin Planning (US) (NQF8)
National Certificate Fin Planning (NQF6)
Wealth Management (NQF5)
Dip Personal Fin Planning
Commissioner of Oaths
24 Years Financial Planning Experience

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