When 1 January rolls around, most of us are a little worse for wear: we’ve overindulged, under-exercised and are more than a little tired. It’s the same with our finances – many of our wallets take a financial overindulgence through the festive season.

Fear not – with a few simple commitments, you can get keep your finances in shape and fighting fit for 2019 in no time.

Deal with debt once and for all
Merlin famously said to Arthur in The Sword in the Stone that ‘the cure for fear or sadness is to do something’. Debt’s crippling power often comes from the shame and procrastination most people succumb to when they are in debt and, like unwashed dishes, the problem grows the longer you leave it.

True wealth cannot happen with debt in the mix, so your first resolution should be to get yourself to an expert as soon in the new year as possible. Be transparent about what you owe, what you make and how you spend. Just the act of talking about it and getting an action plan from a professional will fire you up to slay the debt dragon in 2019.

Try to invest every month
Most savvy people interested in wealth creation are already saving each month – but are you investing with the same regularity? Forbes magazine points out that most bank accounts earn less than 1 percent interest per annum, while inflation is 2 to 3 percent. That same money put into an investment can potentially earn ten times that. So how do you invest as often as every 30 days?

Luckily, this is the 21st century and, yes, there is an app for that – several in fact. Ask around with money-savvy friends to see what they use, or create a recurring calendar item in your calendar to remind you. Try something out, see if it fits and keep on trying.

Write down everything you spend – and get the family to do the same
This one is incredibly powerful. We all operate under some illusion of what we really spend money on and a wake-up call can be just the thing your January budget needs. Create a note on your phone or buy a notebook and jot down every single thing you spend money on and try to get your spouse, kids or flatmate to do the same. Just this act alone will make you spend more mindfully – which often means less.

Try a one week – or one month – cash detox
Just like the detox plans many of us go on physically, your money can also benefit from a cleanse after the splurges of the festive season. Use your handy notebook or phone note from the previous resolution and calculate what you spend in a week. Now, draw that money in cash. We can be very flippant with our finances when they are as intangible as swiping a card. With physical cash it’s easier to truly picture your wealth and how you’re stewarding it.

It’s a terrible misnomer, but the festive season – which is all about cheer and goodwill to all in various religions – is one of the most wasteful of the year. There are piles of present wrappings, tons of unwanted toys and lots of leftovers – but it doesn’t have to be that way. To enjoy less wasteful and more charitable festivities this year, just follow these tips:

Wrapping waste
Recycle all your wrapping paper or take it down to the local dump and try and encourage family and friends to reuse wrapping from last year. You can also look to wrapping gifts… in other gifts. T-shirts, scarves, towels and bags can all be used as innovative wrappings with rafia or ribbons; no plastics, tapes or wasteful paper needed. Remember, there’s no shame in eliminating waste!

Leftover lunch (and dinner… and snacks!)
Three words – cook, compassion or compost. There are plenty of websites for how to use leftovers the next day and beyond, from gammon sandwiches and gourmet lamb burgers to reused mince pies and end-of-the-month salticrax snacks. Alternatively, as is the Boxing Day custom, a more compassionate and charitable option is look online for a local charity collecting and giving away food. You could even ask on your local Facebook community pages and join a drive to spread festive cheer to those less-fortunate. Try searching on www.giveback.co.za or www.forgood.co.za if you’re really stuck. Finally… compost, but this only applies to vegetable leftovers. Meat scraps that are headed for the bin are probably best wrapped in foil, frozen and then donated to your local animal shelter.

Unwanted gifts
A powerful and useful practice to try as a family could be to spend a portion of your Christmas Day giving out unwanted gifts (like those from your office party…), combined with something more immediately sustaining like leftover food, to the homeless (yes this was covered earlier, but it’s Christmas – who’s counting?). Encourage the family to be honest about what isn’t their taste – it could really make someone else’s day and be a great bonding experience for you and your kin.

December should be a time of rest and relaxation – but for South African investors, the month comes with ominous memories. ‘Nenegate’ and Zuma’s infamous cabinet reshuffle, the Steinhoff collapse and several other rand-slaughtering incidents occurred in the month of the year when everyone was hopefully on holiday; plus the ANC elections occur next December too.

So, what is an investor to do when the last month of the year rolls around and disaster strikes? In the words of Douglas Adams’ The Hitchhiker’s Guide to the Galaxy: don’t panic.

The first thing to do is remember the bigger picture. Many tend to look at the short term. For example, the rand recently dropped below the R14 benchmark to the dollar due to America’s elections and its divisive results, which is positive for the Rand strength. The same person looking at this news is likely to panic if, say, President Trump signs an important new trade agreement and the dollar strengthens or geopolitical risk in South Africa causes the rand to falter.

This will cause anxiety and is also an inaccurate way to view the market. Markets do not work off individual events, but rather longer cycles of bull (growth) and bear (decline) periods. Globally, we are coming out of a very long period of bullish growth. Since 1 January 2009, after the 2008 global financial crisis, the MSCI World Index has come up 292 percent, according to Sygnia Asset Management. This means we are in for a long bear period that has little to do with fluctuations caused by what President Ramaphosa says in his next speech.

The second thing to do is breathe and to remind yourself that all things work in cycles, including the market. We have just come out of a period of high growth globally, but all good things come to an end. So do all bad things. If we are entering a bear market now, that will surely give way to a bull market in due course. It’s also comforting to note that, as Sygnia Asset Management points out, bear markets have historically been shorter than bull markets.

The third thing to do is remind yourself that every season has its usefulness. Many investors focus on the selling aspect of investing that can be such a rush and godsend in the sunny outlook of a bull period. However, a bear market is often when the best opportunities are found at the most reasonable prices. Avoid the temptation to sell out of an emotional place of anxiety when slow growth sets in, and you’ll reap the rewards from all those others surrounding you who sold when the price was low. If you aren’t panicking, you don’t need to make that mistake.

Lastly, give it time. Your portfolio wasn’t built in a day and, if you act rationally, it won’t topple in one day either. All downturns work themselves out and the good investors play the waiting game while they do. It’s all about time in the markets, not timing the markets.

It’s that time of year again, when loved ones begin asking: ‘what do you want for Christmas?’

Your PA is also going to look at you with expectant eyes in terms of what gifts to order for clients, seniors in the company and such. Answering ‘nothing’ is not going to get you very far with either and, so, we’ve compiled a list of the coolest gift ideas that’ll equip and excite for work in 2019 before it’s even begun.

A VR headset
Virtual reality is the future, as we know, and this gift gets serious kudos for being both productivity-enhancing and escapist at the same time. A good headset will cost a few hundred bucks, but it’s so worth it. Any decent model is compatible with most smartphones and you can download content easily from the Apple or Google app stores. The newest VR headsets also have things like adjustable lenses, a soft eye cushion and augmented gaming function to keep you having fun for hours.

A Moleskine Evernote Smart Notebook
The brightest people are ideas people, likely to get hit with a moment of inspiration in the most unlikely places. You need some way to get those thoughts down before they evaporate, and everyone who’s anyone has at least one Moleskin, and now you can up your gift-giving game by presenting clients with an Evernote smart notebook. These Moleskins allow you to write on paper but still have digital backups of your scribbles by simply taking a photo.

A magnetic cellphone holder
For something smaller but still unique, why not try a magnetic mobile device holder? Only costing a couple of hundred bucks, it looks seriously cool seeing your phone stand up by itself on your desk and, at the same time, is useful in that it doesn’t contribute to that inevitable office clutter. The force is strong with this one…

A subscription to Audible.com
Thought leaders are notoriously voracious readers, while at the same time being too busy for anything as sedentary as reading a book. If you want to up your thought leadership status – or help someone else do the same – an Audible subscription is a great way to stimulate your mind with all the latest great reads while stuck in traffic.

A change is as good as a holiday, and a holiday is a good place to start a positive change. For those lucky enough to be going away at the end of this year, we’ve rounded up some of the books the world’s brightest sparks are raving about to get you feeling excited about 2019 while still on your sun lounger.

Anything you want: 40 lessons for a new kind of entrepreneur
This short book is jam-packed with horizon-expanding ideas and out-of-the-box thinking written in a simple way that’s not overwhelming. You’ll find yourself pumped up instead of daunted. It’s an enormous bestseller for a reason, and light enough on both your suitcase and your overtaxed mind.

The Happiness Project
A great pick-me-up but still a non-fiction book in which you’ll learn something, The Happiness Project is a sunny, upbeat book full of practical ideas on how to be more happy while living your best life. Author Gretchen Rubin speaks on practical things like how to fight in an emotionally healthy way, organising cupboards and singing even when you don’t feel like it in a non-preachy way that’ll put a smile on your dial.

The Motivation Myth: How High Achievers Really Set Themselves Up to Win
Sometimes we pummel ourselves to work harder, when productivity isn’t really the problem. If you like peering into the cogs of how things work psychologically, this one is for you. Ghostwriter, speaker, LinkedIn Influencer and author, Jeff Haden says you can make yourself more motivated in simple ways, no need to beat yourself up.

Essentialism: The Disciplined Pursuit of Less
If 2018 has left you feeling a little overwhelmed, this wonderful book is different to many productivity manuals: it’s not about cramming more into your day but discovering what truly matters in terms of productivity and doing that excellently.

However you plan to spend your downtime this season, remember these words from Confucious; “No matter how busy you may think you are you must find time for reading, or surrender yourself to self-chosen ignorance.”

Although the demand for holiday homes in South Africa lost some momentum at the start of last year, according to the FNB Holiday Town House Price Index for February 2018, a renewed year-on-year growth acceleration was demonstrated in the results of the last half of 2017.

In fact, the demand for holiday homes in South Africa has remained reasonably buoyant since 2013, and many property investors purchase a holiday home as a way of diversifying their wealth portfolio and creating an alternative source of income.

Or, for some, a holiday home is quite simply just that — a holiday home. A precious escape away from the hustle and bustle of city life; a safe haven where your only responsibility is not burning the tjops on the braai.

Whatever your reasoning, buying a holiday home does come with its own unique set of considerations that don’t always apply to other types of properties. For the sake of your finances and sanity, it’s worth considering a few important factors before you make your purchase.

1. Maintenance
As idyllic a location may be, and as much as you may fall in love with the thatched roof of a fisherman’s cottage in Paternoster or the rounded gables of a Cape Dutch house in Stellenbosch, don’t forget to factor in maintenance and the costs involved, especially when it comes to older houses.

If you’re only going to be using the home for holidays, it may well remain vacant for periods of time, so it’s important that you either buy something in a good state of repair or set to work to fix any issues. Otherwise, you could be greeted by a crumbling building when you finally do get the chance to unwind, and will spend precious days of vacation time honing your DIY skills.

And if you do plan to let out the property while you’re not using it, then bear in mind that it will need to meet tenant requirements and maintain a competitive edge in the market.

2. Rental income
If you are planning to buy a holiday home to create an income stream, it is important to be aware that short-term rental earnings may be seasonal rather than steady, depending on the location. If you buy a holiday house in Camps Bay, for example, you may well enjoy full occupancy from December to April, but should be prepared for quieter winter months when the cold Atlantic waters aren’t quite as appealing.

Your rental income may also be influenced by public holidays, school holidays or religious festivities. It is, therefore, worth preparing in advance and planning your own use of the house around these peak periods, so that you can maximise your rental income and make up for losses whenever it is vacant.

If you are planning to use the property for your own leisure then it’s important to communicate with a rental agent in advance when the home won’t be available to let.

3. Location
Although the thought of hiding away from the world may appeal to you after being stuck in the office and in traffic, bear in mind that a house in the middle of nowhere may attract a narrower pool of tenants or holidaymakers. The location may also affect your home’s re-sell value. So, while that farm off the beaten track near Loeriesfontein may seem like a great idea when you’re feeling worn out by the daily grind, it may not be such a good idea as an investment.

Bear in mind that not everyone has a 4×4, so it’s also important for the property to be accessible, as well as in a good location. A popular area and nearby attractions will all work in your favour when finding tenants or a future buyer, and it’s also worth trying to understand what tourists visiting the area are interested in. For example, people who go on holiday to the coast are likely to want a good view of the sea. If possible, it may be worth creating a best-of-both-worlds situation where you can enjoy a certain idyll or lifestyle, while still being in reach of amenities and activities that will attract other people.

4. Finances
When it comes to buying a holiday home, it’s important to retain your investment as well as enjoy the element of escapism. Praven Subbramoney, CEO of Private Bank Lending at FNB, notes in an article published by All4Women that many “holiday homes are financed like any other investment property. Therefore, an ideal option would be that of a structured loan, as it provides secured finance for property acquisitions that allow investors to borrow against a mixture of asset classes such as a combination of property, shares, cash or investment portfolio.”

Don’t hesitate to arrange a meeting if you wish to discuss your options and review your situation to decide whether a holiday home may be a good investment for you — both personally and financially speaking.

(Info sourced from all4women.com)

Good health care is not always easily obtainable and quickly becomes a costly experience. Many people who have health cover policies sometimes expect to have more cover than their policy actually includes, and they are saddled with high shortfall bills; they land up paying the difference between the medical cover rate, and the cost of the specialist.

This is because having medical aid doesn’t necessarily mean that you will be fully covered for all treatments. This is because, every year, medical aid providers establish a base rate that can be charged for all procedures, and your medical aid plan will pay a percentage of this rate. A good plan can pay up to 300%, but many specialists or private hospitals charge more than 300%, which can often result in a shortfall that needs to be covered. For example, if a surgeon charges 350% of the base rate and your medical aid covers 300%, you will end up with an additional 50% that needs to be paid.

What is gap cover?

Although small, adhoc amounts can be manageable if a non-urgent issue arises, an accident or the sudden onset of an illness can leave you with no time to save, and you can be left needing to cover a hefty shortfall.

To protect yourself in the event of an emergency, gap cover can be as important as medical cover. Gap cover could be considered as a top-up medical insurance that is designed to pay the difference (the gap) between what a private doctor charges and what your medical scheme pays.

You can only take out gap cover if you already have medical aid, but only one policy is usually required to cover a member and their dependants (as long as they are all on the same scheme with the same options). It can, therefore, work out very affordable if you have several dependants.

What is covered?

Although premiums can still be relatively cheap and benefits can be extensive, times are a-changing when it comes to gap cover, so it’s important to be aware of exactly what is covered. According to an article published on Fin 24, gap cover insurers have needed to curtail their expenditure to remain financially viable in the face of increasing private healthcare costs. After all, insurance schemes are run for profit, and gap cover is an insurance product that complies with the regulations of the Short-term and Long-term Insurance Acts, rather than those of the Medical Schemes Act of 1998.

Gap cover used to pay the difference between what your medical scheme paid and your total medical bill, which meant that even if you had the cheapest hospital plan, you would be covered in full if you had gap cover. However, this also meant that the largest share of medical costs often fell on the shoulders of gap cover providers, instead of medical schemes. Gap cover providers have been known to carry up to 80% of costs, and such heavy shortfalls have meant that full gap cover payment is no longer often sustainable in the long-term.

Consequently, many gap cover providers have introduced new calculations as to how much of the co-payment they will cover, through a match-pay system based on your medical scheme. Depending on your policy, some providers agree to pay up to five times what your medical scheme has paid, while others will only pay up to twice the amount. So, if your bill comes to ZAR20,000, of which your medical scheme will cover ZAR5,000, your gap cover will pay ZAR10,000 if it pays twice the medical scheme contribution. You will still then need to pay ZAR5,000 by yourself. It is, therefore, worth having a medical scheme that pays out as great a percentage as possible of the base tariff, as this will affect how much will be covered by your gap cover too.

It’s also important to note that gap cover will only cover the shortfall on approved specialists or procedures, so it won’t cover something that is excluded by your medical aid plan. Although having gap cover is still highly worthwhile, it’s best to ensure you are informed about what your gap cover policy will likely not pay for, such as upgrades to a private room, wheelchairs or crutches, and cosmetic procedures. Do also read the fine print because there could be some delicate nuances, such as dental treatment may be provided, but only in hospital.

Given all the exclusions and new calculations, it is important that you have a detailed understanding of what your medical aid covers and how your gap cover will work in conjunction with this. If you have any health concerns, the last thing you need to worry about is whether you can afford to receive the appropriate help, so it’s advisable to be as extensively covered as possible when it comes to medical treatment in South Africa. Don’t hesitate to arrange a meeting if you wish to discuss whether you can afford to put (or not put) your family on a gap cover plan.

Towards the end of every year, many medical schemes announce their annual contribution increases for the following year. This makes these last few months of 2018 the perfect time to review your cover and make any necessary amendments, as, until the start of December, most medical aid providers will allow you to change plans or options without penalties.

Alternatively, if you are not happy with your provider, you can even go as far as to switch medical schemes, just be prepared that a new scheme may come with a waiting period of up to six months (during which time you will only be covered for emergencies), and may also charge you higher premiums or penalties, depending on your age and circumstances.

Your medical cover requirements can easily change from year to year — financially and medically speaking — so it makes sense to take this opportunity to review your plan and understand how you are currently covered and whether that is still appropriate. Granted, it’s hard to predict how much you may incur in terms of future medical expenses, so it is difficult to know which plan to choose. However, that is why it’s important to review your medical cover annually to ensure that your plan is in line with your health concerns and budget.

If you aren’t sure about whether you should change your options, start by first calculating how much of your medical expenses over the past year was covered by your medical aid. Once you have worked out this amount, you can then decide whether it would work out more cost-
effective to pay a higher monthly contribution in return for more benefits, or switch to a cheaper option and simply pay more out of your own pocket if the need arises.

If you are relatively young and healthy, you hopefully won’t require much medical attention next year, so it may be worth considering a low-cost option. However, if you are older, suffer from a condition or have a precarious family medical history, it may pay to upgrade.

Money issues

As contribution increases for medical cover tend to be above the Consumer Price Index inflation rate each year, affording adequate cover can be a concern for many people. The good news is that medical schemes and day hospitals are trying to collaborate in order to tackle the high cost of healthcare in South Africa. Procedures at a day hospital are less expensive and you can avoid any unnecessary overnight stays that can end up adding a lot to the bill.

It’s also a good idea to make the most of any opportunities that your medical scheme offers to improve your general wellbeing. Most schemes nowadays offer wellness programmes and reward you for living healthily. If you can be proactive and stick to a programme, the benefits can compensate for some of the costs of your cover.

If funds are currently tight for you, be sure to at least have a hospital plan, which will cover you for certain chronic conditions and hospital admissions. By law, even the most basic of medical schemes should also provide Prescribed Minimum Benefits (PMBs) that will ensure you are covered if you have a life-threatening or chronic condition that is on the PMB list. However, you may need to meet certain requirements before some schemes will cover you.

You could also choose a network option, which is cheaper but means you will be limited to certain healthcare providers within a network. This means that if your nearby hospital or GP isn’t a member of the scheme’s provider network, you may need to change doctors or be prepared to travel further to have an operation or see a specialist. However, the cost of some network options is calculated based on your monthly earnings, so they will come with lower premiums if you’re not currently earning a comfortable salary.

You could also choose an option with a medical savings account, whereby up to a quarter of your monthly contribution goes into the account and the full savings amount for the year will be available from January. Once you have depleted the funds in your savings account, you will need to fund any further medical expenses. So if you don’t feel that a savings allocation will be sufficient to meet your needs, you may be interested in getting threshold cover, whereby any unused savings each year will roll over.

If you do wish to consider changing plans or options, be sure to thoroughly review all benefits and conditions. Take the time to understand how your cover will change, and it’s advisable to contact your provider to clarify all details. For example, if you change to a lower-cost option, it’s possible that you may no longer be covered for certain medication or treatment, such as antidepressants or anxiety medications; or you may be covered for a different brand of medication to that which you previously used.

Don’t hesitate to also arrange a meeting to discuss your financial situation so that you can decide what steps you can afford to take with regards to your medical cover.

(Info from iol.co.za)

“Without mental health there can be no true physical health” – Dr Brock Chisholm, the first Director-General of the World Health Organisation (WHO)

Dr Brock Chisholm was a psychiatrist who asserted the notion that mental and physical health are linked, and an increasing amount of evidence highlights the impact that mental illnesses — particularly depression and anxiety — can have on physical health. Even though this may be the case, policy unfortunately still continues to lag behind when it comes to addressing mental health issues in South Africa.

Wednesday, 10th October marks this year’s World Mental Health Day, which will focus on young people and their mental health. Presented by the World Federation of Mental Health, the goal of this day is to raise awareness about mental health issues and encourage people to help those dealing with such issues.

Statistics show that approximately a third of South Africans will suffer from a mental health condition in their lifetime, which can affect a person’s capacity to maintain relationships and a job. However, the stigma attached to many mental health issues makes it even more difficult for those affected to get the help that they so vitally need, which causes further problems — be that physical, social or financial.

One of the first steps in dealing with mental health issues is to quash any ill-informed and damaging attitudes. This can be done by raising awareness as to the facts, so that we can develop a better understanding of the problems that so many people face. Once it is widely recognised that a mental health issue is a valid medical issue, we can set about further identifying causes and working on better solutions.

Mental Health and Medical Schemes

Being diagnosed with a mental health condition can be unnerving, and understandably comes with questions regarding treatments and long-term prognosis, as well as what will be paid for by medical aid. However, the Director of the South African Depression and Anxiety Group (SADAG) notes that “individuals accessing mental health and psychiatric services are frequently uninformed, not only about what services are offered, but also about what to expect from mental health and psychiatric professionals. Mental health and psychiatric patients frequently complain that they haven’t been told their diagnosis, what the medication they have been prescribed is for, or what to expect from the medication. “

There have been some disturbing issues with medical aid schemes in South Africa, as psychiatric patients often haven’t enjoyed the same rights as those with more general medical conditions (in both the public health sector and by private medical aid schemes).

Although some medical aid providers have tried to make changes to their plans, it is still often the case that not all medical conditions are afforded equal consideration. It’s important to understand that a psychotic episode can be compared to a heart attack in its unpredictability and debilitating nature.

However, psychiatric medications are prescribed less readily than medications for heart disease, and some medical aids only cover 15 outpatient visits each year or three weeks of hospitalisation for patients with mental illnesses.

Costs can become quite substantial when it comes to treating a mental illness, and many patients who have found the right treatment are unable to afford it. Sadly, the majority of people in low to middle-income brackets don’t receive any treatment for severe disorders. It is a Catch-22 situation in that a mental illness can severely impact someone’s financial productivity, leaving them in a situation where they don’t have the necessary funds to treat their condition in order to be able to function properly and earn money again.

This World Mental Health Day, it’s important to know your rights when it comes to the treatment you are eligible to receive for a mental health condition. Your expectations should be in line with what your scheme offers, so don’t hesitate to arrange a meeting if you have any doubts.

Medical schemes currently have Prescribed Minimum Benefits (PMBs), which provide access to a basic minimum of health services, regardless of the chosen plan. These are a feature of the Medical Schemes Act to ensure that medical schemes fully cover the costs related to the diagnosis and treatment of emergency and chronic conditions. Even a hospital plan should offer PMBs, although a medical aid provider can have certain conditions to obtaining these benefits.

Try to set aside some time to familiarise yourself with your scheme’s provisions and protocols, and make any changes if necessary. Prioritise both your mental and physical well-being, and don’t underestimate the prevalence or effects of mental health conditions.

Information for this blog was sourced through leadsa.co.za.

Understanding how your (or your loved one’s) possessions and wealth are treated when you pass away is crucial to how you plan for what will happen to them. This blog is aimed at breaking down an incredibly paper-heavy, jargon-filled process!

When a taxpayer dies, all their assets are placed in an estate, which is commonly referred to as a ‘deceased estate’. Assets can include a property, a car, money in the bank, and even furniture.

Once an executor has completed all the administration and has repaid all the deceased’s debts, the remaining assets will be distributed to the beneficiaries, which can be heirs and/or legatees (a legatee receives a specific asset from the estate, while an heir receives the balance).

Anyone who owns a property in South Africa is forced to comply with South African inheritance laws, and inheritances are governed by The Administration of Estates Act, The Wills Act, and The Intestate Succession Act (yup – paper-heavy!).

There are agreements with certain countries to avoid double taxation in relation to estate duty, such as the UK, USA, Zimbabwe, Botswana, Lesotho and Swaziland.

A brief overview of estate duty

Estate duty is a tax on the transfer of assets from a deceased estate to beneficiaries and, as of February 2018, the rate of estate duty increased from 20% to 25% on estates worth more than ZAR30 million.

A person is liable to pay tax on all income that they receive or accrue up until the time of their death, and an executor will act as the representative taxpayer to settle any outstanding debts. The deceased estate can be tallied up from the date of death, and all assets will be held by the estate until the account has been inspected and finalised. Once this has been done, the assets will be either distributed amongst the heirs or delivered to the trustee.

An estate worth less than ZAR30 million is subject to estate duty of 20%, after a deduction of ZAR3.5 million against the net value of the estate has been taken into account. For example, if the total net value of an estate equates to ZAR4.5 million, an amount of ZAR200,000 will be liable to be paid in estate duty (20% of ZAR1 million, which is the amount exceeding ZAR3.5 million). Generally, the executor will take care of paying the estate duty, but there are times when the beneficiary pays the duty directly.

Inheritance vs. donations tax

The good news is that you don’t need to pay tax on any money that you inherit, as an asset inherited is a ‘capital receipt’ and is not included in your gross income. You also won’t have to pay Capital Gains Tax on an inheritance as, if CGT is applicable, it is usually paid by the estate.

In terms of taxation, an inheritance is treated differently to a donation and a gift. Companies or trusts are exempt from paying tax on up to ZAR10,000 in casual gifts in one tax year, while South African residents can receive up to ZAR100,000 worth of donations tax-free.

However, any donations above this amount are subject to a donations tax of 20%. So, if you are donated ZAR140,000 (whether in a once-off lump sum or over several donations), ZAR8,000 will be payable in donations tax (20% of ZAR40,000, which is the amount exceeding ZAR100,000).

When it comes to property, donations tax is payable at a flat rate of 20% on the value of a donated property. However, donations exceeding ZAR30 million are taxed at a rate of 25%; and only the first ZAR100,000 of property donated each year is exempt from tax.

It is the donor’s responsibility to pay donations tax when donating property, but if they fail to do so within a set time period, the onus falls on both the donee and the donor together. However, donations tax doesn’t apply between spouses, South African group companies and if donations are made to certain public benefit organisations.

In light of these regulations and restrictions, it’s important to decide how you can best arrange your affairs to ensure you maximise the amount you can give to your loved ones. Don’t hesitate to arrange a meeting to discuss your liabilities and options, so that you can ensure your assets aren’t subject to unnecessary deductions.

Information for this blog was sourced from: http://www.sars.gov.za