Philanthropic Investment: people and the planet

Developments in science, environmental concerns and the rise of social media have created greater awareness of human activity and the ensuing damages we effect around the world. Along with this greater understanding, comes a more responsible investor who takes specific interest in how investments may be used for the benefit of the planet.

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Will you outlive your retirement capital?

Solving the Retirement Riddle

For many years investors have enjoyed the benefits of local investment markets which have delivered returns far in excess of more conservative and ‘normalised’ financial planning budgets. Money market – the lowest risk asset class – has beaten inflation by 4% per year, for 25 years! Local equities have delivered almost 9% in excess of inflation, property more than 12%! Which makes the more recent market returns somewhat sobering: negative real returns in 2016 for the average balanced fund, and only inflation matching returns for the past three years.

For investors in retirement these lower returns have started to cause real concern: will their retirement capital be sufficient to last their lifetime?

The boom years made it relatively easy to sustain higher lifestyles and levels of drawings from portfolios, typically out of a living annuity (where the investor takes the risk on the longevity of their capital). High returns hid the fact that the majority of retirees were under saved, overdrawing, or both. As it stands the average living annuity drawing rate in SA is about 6.5% per year, in excess of the recommended guidelines.

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Counting the cost of the cabinet reshuffle and credit rating downgrade on local investment returns

Investors will be concerned over the recent news of the ‘authoritarian’ cabinet reshuffle and consequent credit rating downgrade from S&P on the 3rd of April. This has important implications for all asset classes, and therefore prospective investor returns. This comment aims to provide some insight for investors to help understand how it will affect their investments.

What has happened thus far:

  • A major reshuffle in cabinet ministers seen as a destabilising move by the government. Primarily this drives uncertainty on economic policy, and the stability of state institutions (e.g. Eskom). Increased uncertainty increases the risk attached to South African linked investments, typically resulting in a fall in prices (and therefore returns).
  • The currency as well as government bonds and local dependent shares (like banks) have sold off to reflect worsening prospects. This impacts most investors.

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Our Involvement with Petals Care

Petals Care Centre (owned by the PETALS TRUST) was established in 2014 by founding member, Christine Coelho. It provides a secure facility for elderly men and women who are destitute, to enjoy peace and independent living within a safe environment.

Their latest residential premises in Riviersonderend were purchased in 2016 and accommodate 16 residents who:

  • suffer from dementing illnesses;
  • are destitute from families;
  • need access to proper personal care;
  • suffer from sensory or physical disabilities;
  • are victims of domestic violence.

It is our joy to manage the financial statements for Petals Care Centre, absolutely free of charge.

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2017 Taxation Update


The maximum marginal rate for natural persons is increased to 45% (previously 41%) and is reached when taxable income exceeds R1 500 000.

The minimum rate of tax remains at 18% on taxable income not exceeding R189 880.

The primary rebate for all natural persons has been increased to R13 635 (previously R13 500). The additional rebate for persons aged 65 years and older is increased to R7 479 (previously R7 407). Persons aged 75 and older are granted a further R2 493 (previously R2 466).

The tax free portion of interest income remains at R23 800 for taxpayers under 65 years of age, and R34 500 for persons aged 65 years and older. In addition the tax-free savings dispensation for other investments, including collective investment schemes, became operative 1 March 2015 and is R33 000 (previously R30 000) per tax year.

Local dividends tax is increased to a flat 20% rate (previously R15%), effective 22 February 2017.

Foreign dividends are also to be taxed at a flat rate of 20%, however, this may be reduced in terms of Double Tax Treaties.

An individual is exempt from the payment of provisional tax if the individual does not carry on any business and the individual’s taxable income…

  • will not exceed the tax threshold (see 4 below) for the tax year, or
  • from interest, foreign dividends and rental will be R30 000 or less for the tax year.
Taxable income (R)Rates of tax
0 – 189 88018% of taxable income
189 881 – 296 540R 34 178 + 26% of taxable income above R 189 880
296 541 – 410 460R 61 910 + 31% of taxable income above R 296 540
410 461 – 555 600R 97 225 + 36% of taxable income above R 410 460
555 601 – 708 310R149 475 + 39% of taxable income above R 555 600
708 311 – 1 500 000R209 032 + 41% of taxable income above R 708 310
1 500 001 and aboveR533 625 + 45% of taxable income above R1 500 000

Individual Tax Thresholds

Liability for tax is as follows:
Under 65 yearsR75 750(previously R 75 000)
65 to 74 yearsR117 300(previously R116 150)
75 years and olderR131 150(previously R129 850)


The flat rate increases/d to 45% (previously 41%), although distributions in the same tax year are taxed instead in the beneficiaries hands.

Estate Duty and Donations Tax

The rate of estate duty and donations tax remains at 20%.

The estate duty abatement (exempt threshold) remains at R3,5 million per person and a surviving spouse may also benefit automatically from any unused deduction in the first dying spouse’s estate, i.e., the abatement remains a combined maximum R7 million for the second dying spouse.

Estate pegging through the use of soft loans to trusts are under review. Proposals are that the asset growth in the trust be included in a deceased estate and that interest free loans to trusts be treated as donations.

The first R100 000 of amounts donated in each tax year by a natural person remains exempt from donations tax. Donations between spouses are fully exempt.

Capital Gains Tax (CGT)

  • The annual capital gain exclusion for individuals increases remains at R40 000.
  • The primary residence exclusion from capital gains tax remains at R2 million.
  • The capital gain exclusion at death remains at R300 000.
  • The effective rate of CGT is the range of 7.2% to 18% for individuals, 22,4% for companies and 36% for trusts, although correctly structured trusts can result in the individual rate being applicable.

Retirement Funds (The tables remain as before)

Retirement Fund Lump Sum Withdrawal Benefits

Taxable IncomeRates of Tax
0 – 25 0000% of taxable income
25 001 – 660 00018% of taxable income above 25 000
660 001 – 990 000114 300 + 27% of taxable income above 660 000
990 001 and above203 400 + 36% of taxable income above 990 000

Retirement Fund Lump Sum Retirement Benefits or Severance benefits

Taxable IncomeRates of Tax
0 – 500 0000% of taxable income
500 001 – 700 00018% of taxable income above 500 000
700 001 – 1 050 00036 000 + 27% of taxable income above 700 000
1 050 001 and above130 500 + 36% of taxable income above 1 050 000
  • Tax Harmonisation of Retirement Fund Contributions As from 1 March 2016, all retirement funds (pension, provident and retirement annuity funds) are treated similarly for tax contribution purposes. The tax deduction formula of 27,5% per annum (with a cap of R350 000) of the greater of taxable income and remuneration applies to members of all retirement funds, including provident funds.
  • Annuitisation Pension and Retirement Annuity (RA) Funds will still require a compulsory annuity purchase upon retirement with two-thirds of such fund benefits whereas Provident Fund benefits may be commuted in full, until 1 March 2018. The threshold below, which a full fund benefit from a Pension or RA is allowed to be commuted, is R247 500 effective 1 March 2016.
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