How is your Bank Interest Taxed?

Ruvan J Grobler • November 29, 2024

After the COVID lockdowns, the SARB pushed up interest rates to fight rising inflation. This made money market rates rise and investors rushed to take advantage. Billions were moved from shares into savings account even though share prices and dividend growth were on the horizon.

 

Many South African investors choose to earn interest through bank savings and fixed deposits but neglect to take taxes into account. Interest earnings are taxed as income, effectively increasing your taxable income. A shock to many when their tax returns are due. SARS does however give you a small annual exemption on interest earnings:

 

  • Under 65 years of age – The first R23 800 of interest income is exempt.
  • 65 years of age and over – The first R34 500 of interest income is exempt.

 

Here is an example to illustrate the post-tax rate and pay out for three different income tax rates. The conclusion being that high earners should be careful of interest earnings.


  • Long-term opportunity?

 

In September, the SARB started cutting interest rates to stimulate economic activity as inflation cooled. Further interest rate cuts are expected as inflation fell to 2.8% in October, a four-year low. Signalling further reduced rates on money market instruments.

 

Being invested in the money market can be part of an effective financial plan where liquidity is needed in the short-term. But how does it compare to the JSE over a longer term?

Ruvan J Grobler RFP™ (PGDip Financial Planning)

How to invest in a volatile market

By Geo Botha • July 4, 2025
How to invest in a volatile market: 3 Principles to keep in mind ‘In the short term, markets can be very volatile depending on which news story makes headlines. However, over the longer-term investors are always rewarded for staying invested and riding out the waves.’ We know this by now, we have heard it many times before and historical data proves it. Yet it’s easier said than done. When it gets to our own money we are emotionally involved and there is a part of us that believes that this time, it might indeed be different. What if the markets never recover and I suffer permanent capital loss. And with the increase power of AI and social media, it feels like my portfolio hangs on the thread of a single Tweet. In this article Stephen Bernard, an actuarial analyst form our partner Allan Gray share his views, backed by statistics and historical evidence: Read the article here: https://www.allangray.co.za/latest-insights/markets-and-economy/how-to-invest-in-a-volatile-market/

Invest Globally, Prosper Locally: Offshore Strategies for SA Investors

By Ruvan J Grobler • July 1, 2025
In an increasingly interconnected global economy, South African investors are finding compelling reasons to look beyond local borders when building long-term wealth. Offshore investing offers access to broader, more resilient markets, particularly in developed economies with stronger currencies and more stable political environments. Given South Africa’s constrained economic growth, fiscal uncertainty, and the rand’s vulnerability as an emerging market currency, allocating a portion of your portfolio offshore can serve as both a growth engine and a hedge. Investing offshore provides exposure to world-leading companies, industries, and fund managers that are often unavailable in the local market. It allows investors to participate in innovation-led growth in sectors like technology, healthcare, and clean energy, which are typically underrepresented on the JSE. Most importantly, it supports diversification—not just across asset classes, but across geographies, currencies, and economic cycles—reducing concentration risk tied to the South African economy. Key Reasons to Invest Offshore: Diversification: Reduce reliance on South African markets and benefit from a broader global opportunity set. Currency Hedge: Protect your wealth against rand depreciation by investing in hard currencies. Global Access: Gain exposure to top-tier international asset managers and world-class investments. Growth Potential: Participate in faster-growing economies and industries driving global expansion. Important Considerations for South African Tax Residents Before investing offshore, it’s essential to evaluate how your investment aligns with your broader financial planning, particularly around access, succession, taxation, and estate planning: Flexibility: Will you have access to your funds when needed? What types of investments can you hold? Succession Planning: Can your investment be transferred to your heirs? Will Capital Gains Tax (CGT) apply? Tax Compliance: Is the structure tax-efficient, and what must be declared on your tax return? Estate Structuring: Will your investment attract foreign estate duties? Is an offshore executor required? An Efficient Offshore Solution: The Offshore Wrapper A tailored offshore wrapper can simplify many of these complexities, offering a cost-effective and administratively streamlined solution. Key benefits include: No exposure to offshore estate duties No South African executor fees on death No inheritance tax in the offshore jurisdiction Ability to nominate beneficiaries directly for smooth succession Creditor protection for assets held within the structure Consolidation of various investments (e.g., share portfolios, funds) under one structure Minimum investment from $25,000 Tax Treatment The offshore wrapper also provides significant tax efficiency: Taxes are calculated and settled annually by the platform—no action required by the investor CGT is capped at 12%, and income tax at 30% Taxes are applied to USD returns, meaning rand depreciation is not taxed Reach out to me at ruvan@bovest.co.za for more information. Ruvan J Grobler RFP™ (PGDip Financial Planning)