Press release [MONEY MARKETING]
- Personal circumstances
- General investment considerations
- Fund specific considerstions
- Fund manager credentials
Your personal financial circumstance is a key factor in determining how you go about approaching Section 12J. As a starting point, your level of taxable income determines the tax benefit you receive in the year of investment. If you are in the highest tax bracket (45%), for every R100 000 invested into a Section 12J, you will receive a tax deduction of R45 000, which means that your risk capital is R55 000. Individuals and trusts can invest a maximum of R2.5m each year, while companies can invest up to R5m. Other key questions to consider include the percentage of your overall investment portfolio that are you willing to put into Section 12J, the kind of risk profile (high, moderate or low) you’re looking for, the investment time-frame of the fund, the capital growth or dividend yield you can expect to receive. An investment into a Section 12J VCC must be held for 5 years to retain the tax benefit.
General investment considerations
Once you’ve established your personal investment circumstances, you need to look at factors such as investment sector performance and growth considerations. Some sectors such as hospitality provide for medium risk and moderate growth. A Section 12J fund that is focused on building a new hotel can be expected to deliver reasonable and reliable returns over the long-term, while also spurring on the development of service providers and job creation in and around the hotel. On the other hand, higher risk sectors, such as tech-based funds, will naturally offer higher growth opportunities if they meet their full potential. Funds that operate in sectors like renewable energy have their own macro-economic policy considerations and are subject to changes in government policies – which work well for this sector.
Want to know more about Section 12J? Visit our Section 12J page
Gareth van Zyl
Fox Street Communications
Tel: +27 83 129 9864