South Africans should plan their investments to get the best out of tax benefits at the start of the year.
Image: Freepik
South Africans should start planning for the tax year at the beginning, not when it’s time to file, to get the most from their investments.
This is according to Adrian Hope-Bailie, founder of Fynbos Money, who says waiting until the end of the tax year could limit long-term returns because decisions are often made under pressure.
“The end of the tax year tends to trigger urgency, but the real opportunity sits at the beginning,” Hope-Bailie said. “Small, consistent decisions made early on can have a far greater impact than last-minute contributions made under pressure,” he added.
In April, the South African Revenue Service said it had collected R2.010 trillion in tax, a historic milestone. Over the past seven years, revenue collections have grown at a compound annual growth rate of 6.8%.
Since 1997, of the R25.1 trillion collected, R11.5 trillion was collected in the last seven years. This was achieved despite the most daunting challenges of the ravaging COVID-19 pandemic, loadshedding and a sluggish economy.
With the new tax year now underway, Hope-Bailie said financial planning should shift from reactive decision-making to structured, consistent action.
One of the most effective steps is automating savings and investments, he said, as fixed monthly contributions reduce reliance on discipline and help build consistency over time.
“Consistency is where value is created,” said Hope-Bailie. “If you wait until the end of the tax year, you’re relying on surplus cash and good intentions. Starting early allows you to build momentum instead.”
Tax-Free Savings Accounts also benefit from early contributions, Hope-Bailie said. While many investors use their annual allowance closer to the deadline, spreading contributions across the year allows funds more time to grow.
“If you contribute monthly, your money has more time for compound growth, rather than a single lump sum that only starts working at the very end of the cycle,” he said.
In the February National Budget, Finance Minister Enoch Godongwana proposed increasing the yearly tax-free savings account contribution limit from R36,000 to R46 000 – the first adjustment in six years.
Investors can now reach their R500,000 lifetime contribution cap roughly three years faster, allowing their capital more time to grow, entirely shielded from taxes on dividends, interest, and capital gains.
Hope-Bailie said contributing throughout the year can also make the annual limit of R46,000 more manageable, particularly in a constrained economic environment.
Adrian Hope-Bailie, founder of Fynbos Money.
Image: Supplied
The start of the tax year also provides an opportunity to reassess financial priorities, including budgets, savings goals and investment allocations, according to Hope-Bailie.
“Financial planning shouldn’t be something you revisit once a year under pressure,” Hope-Bailie said. “It works best when it’s built into your routine from the outset.”
Hope-Bailie said the advantage of early action comes down to time, as funds invested earlier in the year benefit longer from market movements and compounding, while delayed contributions have less time to grow.
“The tax year is a 12-month opportunity. The earlier you start, the more you benefit,” said Hope-Bailie.
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