Money Management: Be Smart with Your Taxes
Are you paying your taxes? I hope you are!
Jesus told us that it is good to pay your taxes. He said, “Give back to Caesar what is Caesar’s, and to God what is God’s.” (Matthew 22:21 NIV)
God’s word also tells us, “Everyone must submit to governing authorities. For all authority comes from God, and those in positions of authority have been placed there by God.” (Romans 13:1 NLT)
It goes on and says, “This is also why you pay taxes, for the authorities are God’s servants, who give their full time to governing. Give to everyone what you owe them: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor.” (Romans 13:6-7 NIV)
Based on God’s Word, I want to encourage you to abide by the rules of the taxman.
Now, when it comes to your taxes, it is important to keep track of your finances so that you are well-prepared when the tax season opens.
I also want to encourage you to be smart about your taxes by taking advantage of the permissible tax deductions that are available. Governments incentivize their citizens to save money. When you make use of approved savings and investment opportunities, you can qualify for certain tax deductions and incentives.
So, pay your taxes, but make sure that you make use of the tax deductions on your savings.
Not only will it reduce your tax liability, but it will also help you to build your wealth portfolio.
“The wise have wealth and luxury, but fools spend whatever they get.” (Proverbs 21:20 NLT)
I want to encourage you to be smart with your taxes.
“The plans of the diligent lead to profit as surely as haste leads to poverty.” (Proverbs 21:5 NIV)
South African examples of two savings options where you can benefit from government tax incentives…
| Tax-Free Savings Option | Retirement Annuity | |
| Term | No set term | To age 55+ |
| Access | Yes (unlimited) | You can only access it at age 55. At retirement, you can take 1/3rd in cash. Balance to secure income pension for life |
| Taxation | There is no tax on interest, CGT & dividends, provided you limit contributions. You can invest up to R36,000 p.a., up to a maximum of R500,000 over your lifetime. Make use of your annual allowance. | Premiums up to 27 ½% of your taxable income is tax deductible. (max of R350,000 p.a.) Proceeds are taxed at retirement according to scale. Currently, the 1st R550,000 is tax-free. Make use of your annual tax deduction. |
| Funds | Can make use of a large selection of tax-free funds. | Can make use of a large selection of funds (including guaranteed Managed Solution Funds). Investment must be in line with the Prudential Investment Guidelines as laid down by the Pension Fund Act. |
| Beneficiaries | Can nominate beneficiaries. | Can nominate beneficiaries. Exempt from estate duty under current legislation. |
