A tax-free investment account (TFIA) can be a unit trust investment, a JSE-listed exchange-traded fund and more. It guarantees your capital investment and is an effective way to invest for your goals because any interest, dividends or capital gains will be free of tax.

A tax-free investment account is an investment fund traded on the stock exchange, where assets such as shares, commodities, or bonds are held. A tax-free investment account’s attractiveness lies in its low costs, tax efficiency, and share-like features. With this type of account, you have the choice of either making monthly contribution or a once-off lump sum.

There are limits on the amount you can invest in a tax-free investment account. The total annual contribution in a tax year may not exceed R36 000, while the total lifetime contribution may not exceed R500 000.

There is a stiff penalty tax of 40% for contributions to your tax-free account that exceeds the limits.

Tax-free investment accounts were created to encourage saving and investing and not as a retirement product, although you may use them for retirement savings. Bear in mind that the lifetime contribution limit of R500 000 may not be enough to cover your expenses upon retirement. You can, however, use this investment to supplement your retirement investment.

Yes. There is no limit to the number of tax-free investment accounts you can have, but you must ensure the sum of your annual payments across all your investments doesn’t exceed the annual contribution limit, or you will have to pay a penalty tax.