Three ways to pay less tax 💰

4 min readJul 7, 2022

It’s that time of year again… When you pay tax, you only want to pay what is due, preferably not a cent more. But how? SARS offers a variety of incentives that are sometimes hard to understand. Let’s discuss three of the most common, each of which offers real bang for your buck.

We’ll use two taxpayers as examples: Thembi, who earns R1,4 million per year and who has a husband and two children reliant on her income; and Andy, who earns R500,000 per year and has no dependents.

1. Max out your retirement savings

Contributions you make to a retirement fund (provident fund, pension fund or retirement annuity) are deductible from your taxable income, up to a certain limit. In other words, the amount that SARS uses to calculate how much tax you pay is reduced, so you pay less tax. The flip side is that you’re also putting away money for later in life, which is always a good thing.

SARS allows you to deduct R350,000 or 27,5% of your taxable income, whichever is less. Excess contributions roll over to future years. Thembi, for example, can contribute the full R350,000 and Andy can contribute up to R137,500.

2. Contribute to a tax-free savings account

Tax-free savings accounts (TFSAs) were created to help South Africans save more. Contributing to a TFSA is different to putting money into a retirement fund because you invest after you’ve paid tax (your taxable income is not reduced), but the good thing is that all the growth within the account is tax-free.

You’re allowed to invest R36,000 per year, up to a maximum of R500,000 over your lifetime. Any excess contributions above R36,000 per year will be taxed at 40%. Unused contributions don’t roll over to the next year. You can withdraw from the fund at any time, but once you’ve taken money out you can’t replace it.

Confused? Let’s see how Thembi makes it work. Through good budgeting, she manages to contribute R36,000 into a TFSA each year, reaching her R500K limit in just over 13 years. She leaves the money invested for another 10 years, by which time it has grown, let’s say to R900K. At that stage, she can withdraw the growth on the investment (R400K) without having to pay any tax. She could withdraw the full amount and not pay tax either.

Putting money into a TFSA is a great way to save for the long-term — to supplement your retirement income, for example, or to provide for your children’s education.

3. Medical scheme deductions

A portion of your medical scheme contributions can be deducted from the tax you have to pay each year. It’s called ‘medical credits’ and this is what’s allowed:

* SARS does allow additional medical deductions based on a formula. Read about it on the SARS website.

Using the table above (and ignoring additional medical deductions), for the 2022 tax year Thembi can deduct R1,132 per month (or R13,584 per year) from the tax she has to pay, because she has three dependents. Andy, on the other hand, can deduct R347 per month (or R4,164 per year).

3. Get your ducks in a row

To take advantage of these incentives, you need to get your home accounting up to scratch and you need to provide SARS with all the proof they require. If your medical scheme and retirement contributions are managed by your employer, speak to your HR manager. If you’re self-employed, or if your income is made up of lots of different streams, it might be worth chatting to a tax professional who will be able to advise you on all the loopholes and regulations and other tax that might be applicable to you.

Take some time to browse the SARS website, which has all the information about deductions and tax concepts. Do your homework and save this tax season!




Thoughts, observations and insights. About money, life and 22seven. Visit