How tax-free savings works

What is a Tax-Free Savings Account?

A Tax-Free Savings Account (TFSA) is a special investment account where all your returns are completely tax-free. No capital gains tax when you sell, no dividends tax on distributions, and no tax on interest earned.

• Tax-free growth: Keep 100% of your investment returns

• Flexible access: Withdraw anytime without penalties

• Choose your strategy: Select your own funds and allocations

• Contribution limits: R36,000 per year, R500,000 lifetime

Unlike retirement products, you can access your TFSA money whenever you need it. This makes it ideal for long-term goals like buying a home, funding education, or building wealth for financial independence.

The tax benefits explained

In a normal investment account, SARS takes a portion of your returns through various taxes. A TFSA eliminates all of these:

What this means for you:

• Your money compounds faster because none of it goes to tax

• The longer you invest, the bigger the tax savings become

• R36,000 invested annually can grow significantly more than in a taxable account

For example, if your investments grow by R10,000 in a normal account, you might pay R1,800 in capital gains tax when you sell. In a TFSA, you keep the full R10,000.

Understanding contribution limits

The government limits how much you can contribute to a TFSA to ensure the tax benefits are fairly distributed. There are two limits you need to know:

Annual limit: R36,000

You can contribute up to R36,000 per tax year. The tax year runs from 1 March to the end of February. Any unused allowance does not carry over to the next year.

Lifetime limit: R500,000

Your total contributions across all years cannot exceed R500,000. Once you reach this limit, you cannot add more money to any TFSA, even if you have unused annual allowance.

Important: Exceeding your limits results in a penalty tax of 40% on the excess amount. Fynbos tracks your contributions automatically, but you must declare any contributions made at other providers.

How contributions are measured

TFSA contributions are measured based on the South African tax year, not the calendar year. This runs from 1 March to the end of February.

Key rules:

• Only money you put in counts as a contribution

• Investment growth does not count toward your limits

• Withdrawals do not restore your contribution limit

That last point is important: if you contribute R36,000 and later withdraw R10,000, you cannot put that R10,000 back in the same year. Your annual contribution is still counted as R36,000.

Your TFSA provider gives you an IT3(s) tax certificate after each tax year summarising your contributions. Keep these for your records.

Tracking contributions from other providers

If you have contributed to a TFSA at another provider this tax year, you need to tell Fynbos so we can help you stay within limits.

When you first set up your TFSA, Fynbos asks how much you have already contributed elsewhere this tax year. You can update this amount anytime.

1. Navigate to Tax-free investments from your home screen

2. Tap the menu icon (three dots) on the Contributions card

3. Select Add external contributions

4. Enter the amount you have contributed elsewhere this year

5. Tap Continue

Your contribution tracker now shows both Fynbos contributions and external contributions in different colours, with your remaining allowance clearly displayed.

How your money is invested

When you transfer money into your TFSA, it gets invested according to your chosen strategy. You select the funds and allocations that match your goals and risk tolerance.

How it works:

1. Money transfers from your Cash account to your TFSA

2. Fynbos creates buy orders based on your investment strategy

3. Your money settles into fund holdings (2-3 business days)

4. You own the underlying fund units

Unlike Emergency Savings or Savings pots, which use a fixed money market fund, your TFSA lets you choose from a range of equity funds, balanced funds, and other options.

What this means for you:

• Your investment value fluctuates with the market

• Long-term growth potential is higher than savings accounts

• You control how aggressive or conservative your portfolio is

Setting your investment strategy

Your investment strategy determines how money is split across funds whenever you transfer into your TFSA.

1. Open Tax-free investments

2. Tap the menu icon on the Investment strategy card

3. Select New strategy or Edit strategy

4. Choose your funds from the curated selection

5. Set the percentage allocation for each fund

6. Confirm your strategy

Your strategy applies to all future transfers. Existing holdings remain as they are unless you choose to rebalance manually by selling and rebuying.

Tip: If you are unsure which funds to choose, start with a balanced fund that provides diversification across asset classes and regions.

Withdrawing from your TFSA

You can access your TFSA money at any time. However, because your money is invested in funds, withdrawing requires selling your holdings first.

1. Navigate to Tax-free investments

2. Tap Withdraw

3. Enter how much to sell from each holding

4. Select your bank account for the withdrawal

5. Tap Review withdrawal

What happens next:

• Your sell orders are submitted to the market

• Settlement takes approximately 2-3 business days

• Proceeds are transferred to your linked bank account

Remember: Withdrawals do not restore your contribution limit. If you withdraw R20,000, you cannot put it back without it counting against your annual and lifetime limits.

Transferring a TFSA from another provider

Already have a TFSA elsewhere? You can transfer it to Fynbos without affecting your contribution limits. Section 64 transfers move your TFSA within the tax-free wrapper, so no contributions are counted.

1. Navigate to Tax-free investments

2. Scroll to the transfer card

3. Tap Request transfer

4. Follow the prompts to provide your existing TFSA details

What to expect:

• The other provider will sell your assets and transfer the cash

• The cash arrives in your Fynbos TFSA ready to invest

• You will need to sign transfer documents

• The process typically takes 5-10 business days

• Support will keep you updated throughout

Historical contributions

Fynbos tracks all your contributions over time so you can see your progress toward the lifetime limit.

1. Open Tax-free investments

2. Scroll to the Historical contributions card

3. Tap any year to see the breakdown

For each tax year, you can see:

• Total contributions for that year

• Contributions made through Fynbos

• Contributions made elsewhere (that you declared)

This helps you understand how much of your R500,000 lifetime limit you have used.