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3 Tips Business Owners Can Use to Pay Less in Taxes in South Africa

There is no way to avoid paying tax, and it is essential to submit your tax returns to SARS on time to avoid late submission penalties.  We call late submission penalties fruitless and wasteful expenditure.

However, you can plan and save on your tax bill with allowable tax deductions and maximize tax refunds using Tax-Free Savings, Retirement annuity contributions, Donations, Travel claims, etc.

In this article, I discuss some ways that you can use to optimize deductions, pay less tax and maximize your potential refund in the future.

But before we jump in and get started. The purpose of this article is to empower you with some general tax saving tips and hence if you need personalized recommendations, contact us for a one-on-one consultation. Now on to our first tax saving tip…

1. Contribute Towards a Retirement Fund

Your contributions towards retirement funds are tax-deductible up to a limit of 27,5% of the greater of your personal taxable income or remuneration (to a maximum of R350,000 per year). This limit applies to the total contributions you make to any pension, provident, or retirement annuity (RA) fund during the year. The tax deduction will always be limited to the actual contributions you made.

Your pension and provident fund contributions are usually structured through your company (you will see these on your monthly payslip), but you can top-up your retirement savings yourself by contributing to a RA fund. Because you may not access your RA funds until you are 55 years old, this is a great way to save for your future, while also reducing your annual tax bill.

You don’t pay tax on RA investment returns, such as interest income, dividends and capital gains. When you retire, you can take up to a third of your RA as a lump sum. The first R500,000 that you take as a lump sum is not taxed. Anything more that you take as a lump sum is taxed at incremental rates. Speak to one of our tax consultants or your financial advisor for more details.

2. Open a Tax-free Savings Account (TFSA)

Back in 2015, the National Treasury introduced tax-free savings accounts (TFSAs) to improve the overall savings rate of South African citizens. It’s not often you get a gift from the government, especially in the form of a tax-saving, so it is best to make the most of it.

The South African National Treasury allows you to open a tax-free savings account as an incentive to encourage you to save and invest. With a tax-free savings account, you can save or invest up to R36 000 a year, capped at a total lifetime contribution of R500 000, which will attract zero tax.

Tax-free investments may only be provided by a licensed bank, long-term insurers, a manager of registered collective schemes (with certain exceptions), the National Government, a mutual bank, and a co-operative bank.  For more information, you can speak to your banker, financial advisor, or us as we work collaboratively with many financial advisors.

3. Sign up for an Income Protection Cover

Income protection is a long-term insurance policy designed to replace or supplement your income in the event of illness or injury, which temporarily or permanently prevents you from earning an income. It is not intended to pay out in the event of retrenchment. While the premiums paid on income-protection policies are no longer tax-free, the benefits paid by these policies are exempt from tax—an excellent tool for employees and business owners.


In conclusion, COVID-19 has given us a perspective. It has taught us that a clear retrospective financial perspective when planning for the future is needed. It’s never too late to prepare and plan for your financial future.