Hi there... I have 2 queries on the TFSA. 1. If I contribute the maximum R30k to a TFSA for both my kids, is this classified as a donation, thereby reducing my Income Tax Donation allowance from R100k pa by R60k? 2. If I have a TFSA from 1 service provider in 2015 (eg: Std Bank), do I need to continue with Std Bank next year (2016), or can I open a new TFSA with someone else (eg: Allan Gray)?
Limitless, I would like to add a further question re TFSA for kids. The TFSA is limited to investing in ETF's which normally do not deliver better results than a unrestricted portfolio.Please shed some light on this: A TFSA is opened for a 5 year old kid instead of a normal investment account. Is it correct to assume the TFSA will deliver suppressed returns versus a normal investment? At age 18, how will the tax benefit measure up against the lower expected return? I am trying to figure out if n normal investment account is not the better option for kids? Please clarify this for me.
The issue on reduction of allowable donation is correct. If you fund R30k to each child, you will have used R60k of your donations allowance. Suggest you give your wife R30k and then she makes the deposit to one child. So you spread the donation allowance over R200k for the year iso just over your allowance. Not sure re the move of the TFSA from one supplier to another, but I am very happy with Std Bank. You can open a TFSA with Std Bank Online Share Trading for your children if they are older than 7. Under 7, you must use the TFSA option linked to their own bank acc in internet banking. So for my one child - aged 9, I have his share trading acc and TFSA on same platform which allows immediate trades and the other one - aged 5, has her TFSA as part of her internet banking. A bit irritating as trades are only done around 25-26th of every month in the internet banking space
Samoa, I don't think the TFSA will have such limited returns over the years if we are looking to stay invested. With the ETF's (though limited) you cover most of the world and industries. You are spreading investment risk much better than you would by buying just SATRIX40. The other benefit is that the returns are tax free. Normally 15% is going to SARS on divvies before you receive the remaining 85%. With the TFSA you get the full 100% of the div. On interest, no portion is taxed if earned in TFSA so in 17 yrs from now you will earn big interest that might be bigger that the tax rebate allowed by SARS (this rebate is going to be s*****ped I am sure or at least not increased yearly!) Then the biggie, when you decide to sell some of your ETF's in your golden years - No capital Gains. With all this goodwill from SARS, I am sure that the TFSA will make us all happy over time. I believe this is the way to go. Just don't take out your money soon. Give this TFSA time to grow. I have included it as part of my investment strategy together with normal share account. Just my opinion.