What is the implication of interest being added to a tax free savings account, resulting in a balance over R 33 000 in the tax year?
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
The matter is dealt with in section 12T(5) of the Income Tax act and we copied the relevant provision below:
“Any amount contemplated in subsection (2) shall not be taken into account in determining whether a person contributed in excess in respect of the amounts contemplated in subsections (4) (a) and (c).”
The R33 000, for the 2018 year of assessment, therefore applies to ‘contributions made’ and not to “any amount received by or accrued … in respect of a tax free investment.” The 2014 Explanatory Memorandum agrees with this and states that “annual contribution limit applies to the contributions across all their tax free investments”. Therefore, amounts of ‘income’ or capital gains retained in the investment will not invoke the penalty.