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Author Topic: Living off Dividends.  (Read 48064 times)

Orca

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Re: Living off Dividends.
« Reply #45 on: October 02, 2013, 07:21:17 pm »
Quote from: Bundu on October 02, 2013, 06:57:40 pm
I often buy the same stock in batches at different dates and when I sell some of them, I decide and tell SARS which batch or part of which batch I've sold - have not had hassles so far

Geez Bundu. How do you "Tell" SARS on e-filling?
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Bundu

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Re: Living off Dividends.
« Reply #46 on: October 02, 2013, 07:31:59 pm »
when I still did my own tax on e-filing, I did all the calcs according to what I had decided and every year SARS wanted proof afterwards (like a mini audit) - I then supplied them with copies of my share transactions and a table indicating what I had bought and what I had sold when
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« Last Edit: Tomorrow at 06:13:55 PM by Bundu »

gcr

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Re: Living off Dividends.
« Reply #47 on: October 02, 2013, 09:47:24 pm »
So what prompted SARS to do an audit on your shares. If one follows the e filing form what they ask for is the base figure and the selling price of stock and then CGT is calculated on the difference, less of course any carried forwards losses
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Moonraker

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Re: Living off Dividends.
« Reply #48 on: October 03, 2013, 08:48:32 am »
Both my wife and I get audited regularly. I think it might be due to us not having medical aid and them wanting to ensure that the expenses we declare as deductions are aboveboard. We also make donations to SPCA for which we receive a donations tax receipt so that we can deduct them from taxable income. I suppose they also want to verify that. Never had a problem with shares though. In short SARS trusts no one, except maybe gcr.  ;)
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Bundu

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Re: Living off Dividends.
« Reply #49 on: October 03, 2013, 11:58:36 am »
Quote from: gcr on October 02, 2013, 09:47:24 pm
So what prompted SARS to do an audit on your shares. If one follows the e filing form what they ask for is the base figure and the selling price of stock and then CGT is calculated on the difference, less of course any carried forwards losses

I don't submit an IRP5 and I have various investments and also claim for a home office, so I can understand that they don't just take my word for it
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« Last Edit: Tomorrow at 06:13:55 PM by Bundu »

erwintwr

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Re: Living off Dividends.
« Reply #50 on: August 20, 2014, 06:16:03 pm »
Hi guys

sorry to resurrect an oldish thread, but since its tax related, i think it better to continue the discussion/ line of questions here.

I assume it was concluded more or less, that, should you hold a share for 3 years, and then sell it, Capital gains tax will apply at a max of 10% after the annual exclusion has been deducted...

Thus leaves me the question - doesnt this make ETF investments a much much much better choice over Retirement annuities.

yes the RA is not taxed  with your investments, but the moment you start "retiring" they see it as income, and tax you as such :

Tax Rate   Withdrawal Lump Sum   Retirement Lump sum
0%           0 – R22,500                    0 – R315,000
18%            R22,501 – R600,000   R315,001 – R630,000
27%           R600,001 – R900,000   R630,000 – R945,000
36%           R900,001+                  R945,001+


See withdrawal lumpsum - even if i sell R600,000 every year, 18% of that goes back to treasury, and it just gets worse from there. :wall:

My questions thus - did anyone maybe already do the math already comparing investing in an RA paying tax after or in an ETF where you pay tax before you can invest?


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Patrick

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Re: Living off Dividends.
« Reply #51 on: August 22, 2014, 12:18:42 pm »
Capital gains tax is one third of income tax (so a 13.3% max, not 10%), after the R30k exemption.

So if you decided to retire on your investments, and need to sell R600k worth of shares to live on every month. I'll assume you bought the R600k worth of shares 5 years, and they grew at 15%pa. I'll also assume you're now retired and have no other income. Dividends are pre-taxed, so they don't count here:
Selling price R600 000
Less cost price R300 000
=Capital gain R300 000
Less exemption = R270 000
Divided by 3 to get taxable income = R90 000

Tax on R90 000 p/a = R3474 if you're under 65, if you're over 65, you won't pay a cent!

As to whether it's better than an RA depends on many things. RA fees, performance, your current tax bracket etc. I would imagine that from next year, having the ability to put 27.5% of your salary away without paying tax on it is going to be a worthwhile thing to do. Just make sure you put it somewhere where the performance is good, and the fees are low.

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erwintwr

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Re: Living off Dividends.
« Reply #52 on: August 22, 2014, 03:52:51 pm »
Quote from: Patrick on August 22, 2014, 12:18:42 pm
Capital gains tax is one third of income tax (so a 13.3% max, not 10%), after the R30k exemption.

So if you decided to retire on your investments, and need to sell R600k worth of shares to live on every month. I'll assume you bought the R600k worth of shares 5 years, and they grew at 15%pa. I'll also assume you're now retired and have no other income. Dividends are pre-taxed, so they don't count here:
Selling price R600 000
Less cost price R300 000
=Capital gain R300 000
Less exemption = R270 000
Divided by 3 to get taxable income = R90 000

Tax on R90 000 p/a = R3474 if you're under 65, if you're over 65, you won't pay a cent!

As to whether it's better than an RA depends on many things. RA fees, performance, your current tax bracket etc. I would imagine that from next year, having the ability to put 27.5% of your salary away without paying tax on it is going to be a worthwhile thing to do. Just make sure you put it somewhere where the performance is good, and the fees are low.


Much much clearer now! Thx Patrick.

yes 27.5% really looks tasty, but i am not looking forward to working till 55 to wait for an RA. will see if i can get a balance going between the two.
I think i prefer a trustworthy RA maybe beats lower fee's eg Allangray or coronation vs ETFSA or 10x. will prefer being in control of my own shares rather to be honest.
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