By Thinus Marais, Financial Adviser at Momentum Financial Planning

Maintaining better habits and hitting goals is a priority for most, but with February already here, that productive momentum is often replaced by the pressure of tax season. This period is frequently viewed as a complex and begrudging obligation; tax returns are often pushed to the bottom of the to-do list. However, there is a better way to look at it. Rather than viewing tax as a leak in your finances, you can treat it as a strategic lever to help accelerate your path to financial freedom.

Turning tax into an asset

True to the Momentum science of success philosophy success favours the focused. When it comes to wealth creation, that focus should extend to the intentional management of tax affairs. Every Rand saved through tax efficiency is a Rand that can be re-invested into your future, compounding over time to significantly shorten the time spent to achieve your financial goals.

Reframing tax requires moving away from reactive once-off filing and toward a year-round proactive strategy. When you use the correct structures, you can ensure that your hard-earned money works harder for you rather than being eroded by unnecessary tax liability.

Tax efficient growth vehicles

Tax-efficient investment vehicles are the engines of wealth acceleration. Understanding how to integrate these into a broader portfolio is essential for individuals looking to build wealth and financial security. Tax-efficient investment solutions include:

• Retirement annuities (RAs): While the primary goal is long-term security, the immediate benefit of retirement annuities lies in the tax deduction of contributions (up to 27.5% of taxable income, capped at R350,000 per year). This effectively means the South African Revenue Service (SARS) is subsidising a portion of your retirement savings.
• Tax-free savings accounts (TFSAs): These offer a powerful mechanism for growth where all capital gains, dividends, and interest are entirely tax-free. Designed to encourage long-term savings, TFSAs have an annual contribution limit of R36,000 (March to February) and a lifetime contribution limit of R500,00. Because tax is not deducted, TFSA investments grow faster, resulting in a significantly larger pool of capital compared to other investments.

A review window

While tax planning should be a continuous process, the current window before the tax year-end is the most critical time for a structural review. It’s the final opportunity to optimise contributions and ensure that your portfolio is aligned with current legislation.

Waiting until the deadline often leads to rushed decisions or missed opportunities. A proactive review ensures that you are maximising every available benefit, from Section 12B allowances for renewable energy to the strategic balancing of capital gains.

The benefits of a financial adviser

The South African tax landscape is complicated and constantly evolving. Trying to navigate these complexities alone can lead to costly errors and missed opportunities.

The role of the financial adviser is not only to suggest suitable products; they are also an essential partner in the Science of Success. An expert adviser provides technical expertise, including streamlining the complexities of  the "Two-Pot" retirement system and evolving estate duty implications. They also provide strategic focus, ensuring that tax efficiency does not compromise your overall liquidity or risk profile. They help clients to reduce their financial risk by ensuring their investment structures are robust and legally compliant.

While insurance and traditional investments help absorb part of the financial impact of life’s disruptions, a tax-efficient strategy ensures that the foundation of your wealth remains unshaken.

Building a legacy of confidence

Ultimately, tax planning is about more than just the current year’s return; it’s about preventing the erosion of generational wealth. By partnering with a professional, you gain the confidence that you are not just complying with the law but leveraging it to build a more secure and prosperous future.

Rather than viewing tax as an annoying monthly cost or an annual hurdle, see it as a tool to keep your financial plan functioning at its peak.