Does your wealth creation strategy need more love?

February is the month of love, but it’s also the first real month of the year for most of us, once we’ve got back into our routines and come back to grips with life after the holidays in January. As a result, you may be thinking of how to get your 2020 goals going, especially your financial goals, rather than romance.

However, there is a way to think of both. In honour of the month of love, we’ve made a list of things to ask yourself on behalf of your investment strategy, based on some of psychologists and marriage counsellors’ favourite questions for couples to ask each other.

Do we want the same things?

What do you truly want out of your relationship with your money? What’s your ultimate goal – to retire well? Or be protected from unemployment? To have your loved ones protected after you’re gone?

The reason to ask yourself this is to lead on to another question: do you have the right products for your investment strategy? If the discretionary fund you’re in is geared towards offshore investing with the ultimate purpose of retirement, yet you want income coming from that, you and the products you have may be at odds. This is why it’s helpful to review your portfolio regularly and make it’s still working well for you.

Are we spending enough time together?

The key to making any relationship work is spending quality time together, and the same goes for your investments. Life tends to happen and, often, the whole year can go by without most of us revisiting the status update on our investments. In general, it’s a good idea to revisit your investment strategy and see how investments, annuities and the like are all doing between two and four times a year, or whenever a major life event like buying property, marriage, the birth of a child or divorce occurs.

 What do you really need from me to make your dreams come true?

Some of us can be tempted to treat our financial goals like a wish list or creative writing exercise, summoning up whatever dreams our hearts desire and then setting aside whatever funds, effort and time we deem they have available, without stopping to really calculate whether it’s a realistic picture. Again, this is where it helps to have a financial adviser in your court!

It’s important to frame a realistic and achievable investment strategy, armed with information and ideas you need to really achieve those goals.

What are my habits that you do not like which I should stop?

We all have bad money habits. All of us.

There may be some that are hurting your money more than others and, when stopped or cut back, will lead to a blossoming of your relationship. Not sure what your bad habits are? A good place to start is with our piece this month – ‘What’s the state of your budget?’

Ultimately, a wealth creation strategy is a relationship between you and your money. You get good relationships, ones that go the distance, and you get bad ones. And just like any relationship, it takes hard work and honesty.

Coffee, makes you think

After owing its name to the mindful Fransciscan monks, the Capuchin friars, many of us overlook our daily cappuccino (or other frothy delight) and how much we spend on these little luxuries in life.

One of the best ways to add meaning to our money is to be mindful about how we spend it, and our financial well-being is closely linked to how we feel about our money and what it means to us.

If we use the example of buying a daily cup of take-away coffee (this could be from Woolies, Starbucks or your local hipster cafe) – we can learn a lot about our spending habits and bias.

Many people savour the flavour of this power drink each morning, and many caffeine addicts can happily knock back a few in a row. However, some calculations show that if you’re willing to give up just one of those daily cappuccinos, you could save nearly R40,000 in five years and over R90,000 in a decade. 

With the ominous effects of inflation and the cost of living on the rise around the world, it can often seem impossible to save more money without the help of a big bonus or salary increase. However, Hildegard Wilson, a member of the Actuarial Society of South Africa’s investment committee, is quick to ascertain “that you can save without compromising your overall standard of living. With the power of compounding, where growth on your investment earns additional growth, these kinds of ‘breadcrumb’ savings can turn into large amounts over time.”

If you buy a cappuccino from Monday to Friday at an average cost of R25, your coffee habit is costing you roughly R500 a month. If you opt to forego the cappuccinos, you could alternatively commit to investing R500 a month in a multi-asset high-equity unit trust fund. Over the past decade (calculated up until March 2017), high-equity funds have delivered average annual returns of 8.2%. Although this figure offers no guarantee of future performance, if your investment were to achieve an annual average return of 8.2%, you would have just over R37,180 after five years and R93,130 after 10 years.

Foregoing just one cappuccino a day, you could generate a significant lump sum, which could make a serious dent in your debts, or top up an education or retirement fund.

The goal is not to give up a cappuccino, it’s to be mindful of how you use your money and acknowledge that the little things all add up in the end. So… next time you order your beverage of choice, hopefully it makes you think!

The RA-minder

For many, the way in which we save and invest is not a daily conversation, so it’s easy to forget what we have in place AND WHY we have it in place. Here’s a quick reminder!

An RA… or Retirement Annuity is one such product that can often confuse many.

RAs have been around for a long time and are basically private pension plans that help you to save for retirement. As we near the end of yet another tax year, we move into a period that is often referred to as RA season, which is a good time to weigh up the advantages of this investment product

These investment products have evolved into much more flexible and affordable investment vehicles than they once were, and investors can now benefit from “new-generation” RAs on linked investments platforms (LISPs). These offer a vast selection of underlying unit trusts, and they allow contributions to be made at the investor’s discretion, without penalties for missed contributions.

The most significant benefit of having a retirement annuity is the tax deductibility of contributions. Exactly what these deductions and allowable contributions look like are dependent on legislation, so it’s always best to check in on your portfolio to ensure that you’re maximizing the benefits.

An investor can expect to receive an annual tax refund in line with their income, and this RA rebate can considerably boost your retirement benefit.

Capital gains tax normally needs to be paid for any discretionary investment, but this isn’t the case with an RA. Interest and dividends are also not taxed in an RA, which means that the entire growth of your investment is tax-free, which makes a significant difference over the long-term. 

When you retire after the age of 55 and are allowed to take up to one third of your RA in cash, you will have to pay tax on the proceeds taken. However, a portion of the lump-sum benefit is tax-free and the rest is taxed on a sliding scale. And, as you have deferred paying tax on the proceeds, a larger investment amount has had the chance to compound tax-free over time. 

Come retirement, the other two thirds of the proceeds from your RA will be used to purchase an annuity, which will then provide you with an income to sustain you in your golden years. You will need to pay tax on your monthly “income”, but many individuals’ personal tax rates decrease after they retire. 

An RA presents another advantage when it comes to estate planning, as it falls outside of your estate, so the proceeds from your RA will be paid directly to your nominated beneficiaries when you pass away, without the estate duty or executor’s fees. For the most part, your money is also protected from the claims of creditors, which is another great RA-minder! 

In spite of this list of positives, many investors feel uneasy when it comes to retirement annuities and are reluctant to consider them as an investment option. However, it’s important to understand that RAs have evolved significantly, become much more affordable, and new regulations have been implemented to minimise risk and force investors to diversify.

This may not be considered as a positive thing by everyone, as Regulation 28 of the Pension Funds Act does restrict investors to a maximum of 75% allocation in shares, which many people debate as shares have managed to outperform all other asset classes over the long-term. However, this risk management method was implemented to benefit broad spectrum investors in different environments, and it offers more investment protection when markets become volatile.

If your objective is to specifically save for retirement, a retirement annuity could be the best vehicle for you.

What you need to know about the new ‘expat tax’

One of the hardest aspects of working with tax and tax law is that the rules change slightly every year – making it tricky dice to roll without an expert on your team.

There will be a new law soon that legislates how much tax you as a South African must pay on money you do not earn in and from South Africa.

On 1 March, the new section 10(1)(o)(ii) of the Income Tax Act (known as ‘expat tax’) comes in after an extension period granted by the government previously. The section was controversial in that the government said in 2017 that the Taxation Laws Amendment Bill would be done away with completely and all money earned overseas by South Africans would be taxed by the South African government.

Government has backtracked slightly – as of 1 March, 2020, any money over and above R1 million earned by a South African outside of South Africa is subject to South African tax under the new changes.

Here is an overview of how the expat tax could impact you:

Only for South African residents

If you are domiciled in South Africa and are a ‘tax resident’ in the eyes of SARS, then this will apply to you. It also applies to those who have been living in SA for any period in the past year before 1 March 2020. This becomes null and void if you’ve been out of SA for 330 consecutive days, SARS lays it all out here.

Types of income taxed

These vary, but include any salary, wages and forms of remuneration for active employment. Commission, leave pay, bonuses, travel allowances and reimbursements and anything else like that which is earned outside of South Africa will be taxed after the R1m mark.

What will not be taxed

Passive forms of income, like rent earned from a property owned overseas, investment dividends or shareholder amounts for companies outside of South Africa, will not be taxed. This section of the Income Tax Act is all about income received for work.

Only for individuals

The ‘expat tax’ is not for businesses, trust funds, NGOs… only for individuals. In other words, anyone that can earn a salary. Certain independent contractors will also not fall under this tax, but not so for anyone working for a foreign company. If you’re in South Africa or a ‘tax resident’ in the eyes of SARS, it doesn’t matter where your company is domiciled.

How much will you be taxed?

SARS says that everything above R1 million will apply for “the normal tax tables for that particular year of assessment.”

The rates have not changed since last year, so ostensibly that means 41% for those earning R1 million nett income annually and over and the maximum 45% for those earning R1.5 million annually, and over. This means that the maximum anyone will get taxed is 45% – including those getting taxed by the country they are earning in. So, if a South African working for a UK company gets taxed 20 percent on that income by the UK, South Africa will only tax them 25% maximum. 

If you earn money from anyone outside of South Africa and feel this may apply to you, you may want to book a chat so that we can work through the possible implications. 

Gross earnings can add up faster than many realise, especially with the exchange rate being what it is. Ultimately, it’s worth being clued up on anything that affects your money and wealth creation journey.

Share the love with your wallet

Is it time for some romance without the rands? You can sweep someone off their feet whilst keeping yours on the ground.

Valentine’s Day has gained the reputation of being a Hallmark holiday that promotes Lindt rather than love. 

Ahead of rushing off to the shops to buy a big bunch of flowers or box of chocolates, you may wish to take a moment to reflect on the meaning behind the day and how you can best show your affection. 

THE STORY BEHIND THE HISTORY

Valentine’s Day is thought to go back to a fertility festival held on 15 February that was dedicated to a Roman god the traditions of which were believed to guarantee fertility and ease the pain of childbirth. However, the rise of Christianity resulted in pagan rites being outlawed, and the festival was replaced with another annual highlight that revolved around the story of Saint Valentine.

He was a priest who secretly married young people during a time when it was forbidden, as unmarried soldiers were thought to be better fighters because they didn’t have the fear of leaving a wife behind. He was eventually imprisoned and sentenced to a three-part execution consisting of a beating, stoning and decapitation for his crime of defying the then-Emperor’s edict.

However, by remaining resolute in his belief about the sanctity of marriage (in spite of the risks and his eventual punishment), he is regarded by many as a martyr to his Christian cause; and 14th February the date of his execution is now celebrated as a day of love.

He also allegedly healed the judge’s blind daughter, and he ended a letter he wrote to her with the words “from your Valentine”, which has become a focal part of the modern love missive.

THE SAVVY OF HOW YOU CAN SAVE

Nowadays, the amorous event is celebrated in a variety of ways across the world. In South Africa, for example, some women pin the name of their sweetheart to their sleeve, and this is how men can discover that they have a secret admirer. 

For the average South African, spoiling that special someone on Valentine’s Day can become quite a costly affair, but you can still be romantic without splashing too much cash unnecessarily. The key is to plan in advance and budget accordingly. Also consider more experiential or bespoke gifting options that are personal to your relationship.

Write a list of things that your loved one loves, along with how much each thing costs   be this a night out at the movies, or a gift of jewellery. Once you have an idea of prices, set a feasible budget and make a plan of action that sticks to this. 

Blowing all your savings on one day isn’t actually very romantic if it means you wind up begging for loans or eating plain pap for the rest of the year. It’s better to be realistic about what you can afford, and prioritise meaningful presents or experiences over sheer decadence. Alternatively, you may wish to consider skipping some luxuries now so that you can save enough to make your other half happy on the big day itself. 

You can also spread the love without breaking the bank by making a gift rather than buying one. For example, rather than getting into debt by taking your date for a seven-course tasting menu at a fine dining restaurant, try creating a romantic atmosphere in your home and cooking a delicious dinner that you both can enjoy by candlelight. 

Furthermore, if you want to do something particularly special, have a look for any deals that can make an enjoyable day more cost effective. You can still have fun at a low price, and a bit of effort and consideration can be worth far more to someone than simply picking up a large bill.

What’s the state of your budget?

Each year we are presented with our president’s State of the Nation address and the finance minister’s budget speech around the same time. The SONA is closely linked to how money is spent; it’s a powerful reminder for us to consider the close link between our lives and our budgets!

Good finances begin and end with good budgeting – when you have a good budget and stick to it, you’re often 90 percent of the way to wherever you want your money to get you. But what is it about budgets that make it so hard to stick to them?

Failed state 1: The fantasy budget

This may sound familiar: you decide to work out your new budget, so you write down your income, your monthly expenses are guesstimated and some vague savings goals like ‘get out of debt this year’ or ‘save R4000 for retirement every month’ are set.

What’s wrong with this picture?

It’s not specific enough.

Many of us don’t work with an accurate measure of what we are spending day to day. We tell ourselves we spend R250 on our morning cup of coffee at work because that’s an amount we’re subconsciously okay with, when it may be closer to R550 per month. We tell ourselves we’ll ‘get out of debt’ but haven’t tracked exactly how much is owed on the credit card, or how much our interest is costing us.

A budget based on speculation is a fantasy budget.

A better budget: Get real about tracking

There’s a reason why almost every diet out there insists that you start by tracking exactly what you eat – reality is hard, but it works.

To start creating a budget, take a look at your bank statements for the last 3 months at least to determine your real expenses and the exact amount you make monthly. It’s also worth looking at the exact amount of debt outstanding on anything like credit cards or store accounts and, if you have savings goals, the exact amount you’ve saved so far.

Not only will you have a clear picture for the first time, you’ll also be inspired by the dose of reality to keep saving and keep an eye on those expenses.

Failed state 2: The too-tight budget

A super realistic budget shaped by the step above is great, but can sometimes lead to the second most common error in budgeting: a too-tight budget.

This may seem contradictory to you, but it is very important not to account for each and every cent with no flexibility. An okay budget works with exactly what you get and spend in your real life, right now. A good budget realises that life is what happens when you’re making other plans.

If you have no leeway in your budget for emergency expenses, you’re going to struggle to stick to your budget. Emergencies happen, spontaneous purchases happen and sometimes things cost more than even a carefully-planned budget can account for.

A better budget: Set up your own emergency fund

Everyone has sudden expenses, everyone has emergencies. Therefore, everyone can benefit from an emergency fund.

Whatever you can save to guard against these surprises is good, but a general rule of thumb to aim for is three months’ salary tucked away, which will cover you for many unforeseen, unfortunate events. Also, don’t undervalue the importance of insurance for your household items, income and movable assets – not just for your property and car.

Failed state 3:  The emotional budget

You’ve set up your budget and are ready to go, but are you looking at your expenses through objective eyes? Many people classify wants as needs, when in fact they could spend less on eating out, cellphone upgrades, new shoes or the work cafeteria.

Another instance of being emotional with budgeting is when we are unrealistic about how much we can save for certain goals. If our savings goals are unrealistic, we’ll struggle to achieve them and lose precious momentum we need to keep at it. 

Saving is like brushing your teeth – it’s the everyday habit that makes it effective, not a once-off effort.

A better budget: Cut back what you can

Be accurate about what you spend, then evaluate what you can do to cut that down – you’d be amazed at how small amounts add up.

Can’t see your blind spots? Give your budget to someone you trust. They may be able to see with fresh eyes and say: ‘do you really need a new car every year or a bagel from the canteen every day?’

Failed state 4: The solo budget

No man is an island, and very few budgets are either. If you’re married and/or have kids or are living with someone else, you need to take them into account. Why? Because they may well have their own budget ideas that could clash with yours, or you can be assuming something on their part incorrectly. Just because it’s your spouse who always picks up the dry cleaning doesn’t mean that they’ve got it on their budget. And they may well have decided on an aggressive savings plan you know nothing of. It helps to check.

A better budget: Talk the talk

Sit down together and compare budgets. Also, this could be a great opportunity to plan together for a shared incentive, like a holiday. If you have kids, inviting them into the budget conversation can be invaluable education for them too.

Breathe cleaner air in your home

Here’s all you need to know about houseplants!

We live in increasingly polluted environments – both inside and outside! Trees and plants remain the best ‘machines’ for pumping down carbon dioxide and supplying us with clean air.

Without good, clean air, we have less energy and are more prone to allergies and poor health. If you want to improve your home or work space, here are a few reasons why you could consider plants in your home and office.

Choose the plants wisely

If you decide to go for indoor plants, do your research around what different types of plants contain and where they can work best. You’ll find that some plants work best with pets whilst others are toxic to animals and children. Some too are better for the kitchen, others work well in living spaces and others are great for bathrooms and bedrooms.

Are you caring enough?

Caring for living things, like plants and pets, gives you a bigger sense of reward and develops your caring character. Be willing to take care of the plants when you introduce them into your home. As part of your research you can learn about the best ways to take care of the plants.

Don’t have more plants than you can manage, as you have to regularly take care of them.

Cacti and succulents are said to be good plants if you’re a beginner with indoor plants. Plants like Garden Mum, Peace lily and Aloe Vera are great options that are easy to grow and they come with serious health wins. Some, like lavender, release a beautiful aroma into your home whilst ferns are super for filtering the air.

Plants also jazz up your space

A nice looking plant is also a cool decoration for your home. Some say seeing greenery can make you feel more relaxed and calm – good for your everyday mood!

Group your plants together nicely according to different widths and heights. The size difference gives a more organic look than plants of the same size. Setting up plants of the same colour together can be a good idea too.

To make a well-informed decision about your plants and how best to use them as air purifiers, chat to your local nursery and remember, start with easy plants!

Breathing cleaner air doesn’t have to come at the expense of high-end air conditioners – use nature’s purifiers!

Global macro trends for SA investors to watch in 2020

Every investor has their own unique style when it comes to the rigorous decision-making process that goes into what to include in their portfolio and how to weight it. January, with the fresh perspective that comes from a break and a new financial year pending, is often the ideal time to take a look at investment decisions from a new angle.

One of the most useful ways to do that is the big picture look at trends affecting investing on a global scale.

This ‘seeing the wood for the trees’ approach can help with a far longer-term approach.

Here are some of the macro trends experts are saying will most affect investors in 2020 – and far.

Agitated agriculture

Climate change, the hot and bothered elephant in the room in most macrotrends analyses, continues to affect foresights by experts.

In PwC’s ‘Doing Business in Africa’ report, it was forecast that agricultural productivity throughout the continent could be reduced by as much as a third over the next 60 years due to climate change. This will be under even more pressure due to the fact that numerous experts have estimated the world’s biggest population growth for the next 50 years to unequivocally come from Africa. With less agricultural produce and more mouths to feed, what will happen for investors?

This is in direct contrast to the short view, outlined in the 2017/2018 PwC South Africa Agribusiness Insights Survey, which said that agribusiness drives 65 percent of Africa’s employment, with most bigger agribusiness CEOs forecasting a sunny 10 percent revenue growth for coming years.

To invest in agribusiness or not to? That is the question. It depends largely on an investor’s risk profile.

ESG excellence

One shorter-term upside for all this climate focus will likely be the continuing expansion and sophistication of ESG funds, perhaps into a formidable asset class in their own right. ESG has traditionally been seen as a ‘tree hugging alternative’ fund in SA, but has already seen a marked renaissance in the past six months.

However, the environmental ‘E’ sure to be emphasised with all this talk of climate change is likely to only further the ESG interest and value for savvy investors who are willing to look.

The rise and rise of pharmaceuticals

Less of a problem for the rest of Africa – but still a concern for SA – is the global ongoing trend in ageing populations getting older.

We are living longer, but often not living healthier. This has already led to an absolute boom in the frail care and pharmaceutical industries and this is showing no signs of slowing down. Shareholders of medical aids, established drug companies and private healthcare institutions like Netcare are still likely to be laughing all the way to the bank in 2025.

Tech takings

In October, tech thought-leader Gartner made an uncommon media appearance by announcing the findings of their 2019 CIO Survey and, as a result, their 2019-2020 technology trends, which they presented to government as the mostly likely to benefit public services in the next year or two and what their CIOs should look at investing in.

It provides valuable insights for the average investor too.

Startups specialising in digital identity protection software and ‘XaaS’ companies (software companies providing a generalist ‘anything as a service’ range of offerings through the cloud, paid for via subscription). The survey found that a significant 39 percent of government organisations say they plan to spend the greatest amount of any new funding on cloud services above anything else – which for investors means that this industry is ready to boom.

All of these pose attractive opportunities for the average investor, but remember that the savvy investor doesn’t only look at trends – they invest in what they know with the solid advice of a financial professional who knows what they’re doing.

Here’s to a good 2020!

Four ways to invest differently this year

As much as we dislike the idea of New Year’s resolutions, January can bring with it a welcome burst of drive and energy to try and improve things from the previous year.

When it comes to improving your investments, instead of focussing on maximising returns (which is never fully in our control), try focussing on the way you invest.

Try out these four tips to unleash your best inner investor yet in 2020:

Grow your patience

A successful day-trader once said that his training in order to excel at foreign exchange trading was to go each day to the post office at its busiest, with snaking queues and interminable waits. Once he was at last at the front of the queue, he would go to the back and start it all again. This, he said, prepared him to deal with the market better than anything else!

Often, it is our emotions which blind us to rational good sense and, in turn, cause us costly mistakes with our investments. If there’s one thing to learn in 2020 that will help your portfolio, it’s patience and control over such emotions.

Grow your network

The investors specialising in real estate have known this for years: effective networking can lead to effective investing.

We often imagine investment as a solitary affair played out between you and your laptop in an office, or perhaps at 3am at home. Sometimes it’s one on one with your adviser or some such other important party. Actually, the most successful investors are often very successful networkers.

What investors forget is that sometimes the golden rules of business and leadership also apply to investing. Learning is growth and learning is improvement, so why not seek out opportunities to meet with other investors and genuinely ask them why they do what do and try to learn from them?

If you’re thinking of investing more heavily into software companies in the new year, why not seek out meetings with software experts who think differently to you? And different financial professionals or investors who have been in the game longer than you have? If you want to invest differently, speaking to people who think differently is a savvy idea!

A broad mind and a constantly educated mind is a sharp one, and sharp-minded investors make good investment decisions.

Grow your knowledge

Make 2020 your year to find out about an asset class or types of funds you don’t know much about yet… Your goal will not be to move your money into these classes, but to understand your current choices better.

Most investors have varying degrees of knowledge about one or two (sometimes three) asset classes that they ‘believe in’ and tend to avoid everything else. Sometimes these investors know a lot and do very well – but a special sort of knowledge comes to the man or woman who understands how asset classes fit together in certain environments, exactly why some shine when they do and why others falter.

Growing your knowledge base can also include reading very widely and intently on a sector, company or stock you plan on investing in for months before you commit a single cent. It’s an empowering feeling, and guess what? You’re in good company. This is exactly how Warren Buffet allegedly invests.

Grow your vision

For the kind of long-term goals most investors are aiming for, such as retirement and future children’s university fees, long-term vision is vital. Simply keeping abreast with the recent few years is like taking a sprinter and expecting them to win the Comrades Marathon.

January is ideal list-making time, so make a list of exactly what you’d like your money to do for you in ten, twenty, thirty and forty years’ time, as well as after your retirement and even your death. Also, what exactly would you like your portfolio to look like.

This helps you articulate meaning for your money.

Only once you know precisely what you want can your portfolio be uniquely designed around that and measured in your terms of what success looks like.

Try out even one of these tips for longer than a couple of months, and it’s guaranteed to change your life as well as your portfolio. Now that’s worth investing in.

The investors’ tax guide for the 2020 year

In the last few months of the year the personal income tax season hangs over year-end busy-ness like a shroud. Then, the new year begins right away with business’ financial year end looming. The last thing most of us want to think about in January is more tax.

But really, January is the best time to start thinking about tax – when you are comparatively freshest, to give you the most time and preparation possible to make it less awful. And, if you are an investor, it’s not enough to simply cough up in 2020 – several things have changed in regulation and with Sars that may affect the way you are taxed.

After the Finance Minister’s February budget, investors breathed a sigh of relief. No one suspected another VAT change (there would have been an uproar) but dividend tax, capital gains tax and more remained largely unchanged.

However, the relief was bittersweet when the dust settled – the bracket creep that had plagued investors has not been acknowledged at all and so tax breaks were not adjusted for inflation as they usually are.

Even though on paper investors were not taxed much, the lack of inflation adjustment meant that, in reality, investors were getting an effective 2 to 3 percent less out of their investments thanks to tax not taking into account inflation.

The other most significant change for investors, which is less well-known, is the infamous 12J changes. Due to a promised upfront tax incentive for investors, those who invest in venture capital companies (the Section 12J investment class), investment into venture capital essentially doubled in one year – a significant boon for the country!

However, as of November, restrictions to the tax benefit were finalised and passed, meaning that the previously generous tax incentive – hovering at about 45 percent of the total amount invested in Section 12J funds – has been limited to a maximum of R2.5 million. So, only R2.5 million at the most can be invested into the class. If you were one of the higher income earners investing sums of that size into 12J, this obviously affects you. It also affects SME businesses that would have benefitted from the 12J class, the companies invested into by the venture capital funds, as there is now a limit on how much investors can put in.

All of this means slower growth for would-be venture capitalists and has already resulted in the asset class looking less attractive to local investors. If you are team 12J, proceed with caution.

Lastly, one for the petrol heads. Many investors took enthusiastic note of President Ramaphosa’s announcement of a new upcoming automotive special economic zone to be brought in soon to attract local and global investors with significant growth and benefits. However, the taxman has already been all over the development, with numerous (and quite punitive) anti-tax-avoidance measures being proposed, withdrawn and revised several times already in the draft Taxation Laws Amendment Bill. Those who wish to get involved better wait until the dust settles on this one.

Ultimately, tax is a jungle for most of us and it is well worth us having a chat to stay well within the law while still limiting the damage tax can place on your portfolio growth.