Wealth Masters Club - The sunset is upon us, do not miss it!

Article By Johannes Maree



30 June 2021 marks the LAST day before the Section 12J sunset clause kicks in - how does that impact the stakeholders in this sector?


  • Existing investments - No effect. Capital inserted prior to 30 June 2021 will carry on as before, still regulated by the relevant S12J legislation. The tax benefit remains in place.

  • New investments - If made on or before 30 June 2021, no effect, the 100% tax will still apply, and the capital will continue to be managed in line with S12J legislation. However, after 30 June 2021, new investments will no longer attract the 100% tax deduction currently on offer.


What does that mean on a practical level for prospective investors who do not want to miss out on one of the greatest tax incentives ever made available to us as South African taxpayers?


The 2022 tax year (1 March 2021 – 28 February 2022)


We're currently in the 2022 tax year, which ends on the 28th February 2022. Previously the trend was for investors to wait until close to the end of the relevant tax year before making a S12J investment – which made sense, as the tax deduction is achieved in the same tax year as the date when the investment was made, and holding on to cash for longer is sensible.


However, for this 2022 tax year, taxpayers won't be able to wait until year end to invest, they'll have to act within the 1st four months of the tax year, March to June 2021, with the last month being June.


Legal entities vs Individuals


A tax area where legal entities, being companies and trusts, have a distinct advantage over individual taxpayers, is the ability to carry assessed losses forward to future tax years. This brings a unique opportunity to the fore for legal entities wishing to benefit to the maximum from this last S12J opportunity. It's best explained via an example:


Assumptions:

  • The taxpayer is a trust.

  • The trust earns R500 000 in taxable income per annum.

The trust invests R2 500 000 into an S12J fund on 30 June 2021.

Had no S12J investment been made, the numbers would be as follows:

The deal date is key


Many prospective S12J investors, who were planning on investing in S12J for years to come, are obviously disappointed. But the key here is to make the deal date and the cash flow work in your favour. Here, a Smartloan becomes an option, as it will allow a taxpayer to make a qualifying S12J investment within the required time, without having to contribute the full investment from their own cash.


So, even though the sunset clause will limit future options for taxpayers, the options currently on the table are still very exciting. One needs to keep that in mind.


In line with the sunset clause date, Destinata Capital Ltd (FSP 48729 | VCC-0073) has registered a prospectus with the CIPC with an investment window that will close on 30 June 2021.


The views expressed are my own and should not be construed as financial or any other form of advice. For advice, consult your preferred adviser.


CLICK HERE to set up a free consultation with a S12 J specilaist


Wealth Masters Seminar

5 May 2021 | 14:00 - 17:00

Join Coert Coetzee as he teaches you how to create generational wealth through specialised trusts, property investment and taxes. Johannes Maree, the CEO of Destinata Capital will be joining to share his knowledge on tax-saving investments, along with their team of experts who will be sharing their years of knowledge in their specialised fields.

https://www.wealthmastersclub.com/education/wealth-masters-seminar

Wealth Masters Webinar with Studio Guests

8 May 2021 | 09:00 - 16:30

On the 8th of May 2021, Coert Coetzee will teach you how to create enormous Generational Wealth and Tax-Free Cashflow with Businesses, Precious Metals, and Properties in Specialised Offshore Trust Structures in Mauritius with Offshore Debit-Cards.

Although it's FREE, you must still register, because the number of participants will be limited.

For full information and booking, go to:

https://www.wealthmastersclub.com/education/wealth-masters-webinar

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e consultation with a S12J specialist

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