Lesson 2: The TFSA
South Africa's best tax break: how tax-free savings accounts work and the rules that matter.
5 min + quiz
The tax-free savings account is the most generous deal SARS will ever offer you: money that grows completely outside the tax system, forever.
The deal
You contribute money you've already paid tax on. In exchange, everything inside the account — interest, dividends, capital growth — is never taxed again. No tax while it grows, no tax when you withdraw. For decades of compounding, that's an enormous head start.
The limits
- R36,000 per tax year (1 March to end February)
- R500,000 over your lifetime
- Both counted per person, across all providers — two accounts share one limit
- Go over and SARS taxes the excess at a flat 40%
Unused annual room expires each February; it doesn't roll over.
The rule that surprises everyone
Withdrawals never restore contribution room. Put in R36,000, take out R10,000, and you cannot top it back up this year — and your lifetime cap is permanently R10,000 more used. The TFSA punishes in-and-out money. It rewards one behaviour: contribute, leave it, repeat for 20+ years.
What goes inside
A TFSA is a wrapper, not an investment. Inside it you choose what to hold — cash, bonds, or equity ETFs. The tax break is most powerful on investments with high expected growth held for long periods, because that's where the most tax would otherwise leak away. What you pick is a personal decision — the wrapper works the same either way.
Track your room across providers with the TFSA tracker.
Quick quiz — 3 questions
Answer all 3 to finish the lesson.