The start of a new financial year offers an invaluable opportunity to take stock of your tax affairs before the pace of the year sets in. While few people enjoy engaging with tax planning, the truth is that small oversights made early in the year can quietly erode long-term wealth. South Africa’s tax framework offers generous incentives for savers, investors, and those who plan intentionally — yet too many taxpayers leave money on the table through inaction, misunderstanding, or neglect. As the 2025/2026 tax year begins, here are ten common mistakes to avoid.
1. Waiting until February to think about tax: The most common and costly mistake is treating tax planning as an event rather than an ongoing process. Leaving everything to the final weeks of the tax year often results in rushed decisions, missed deductions, and unnecessary stress. True tax efficiency is built month by month — through regular contributions to retirement savings, tracking deductible expenses, and aligning your investment strategy with your tax goals. Remember: the earlier you start, the more time your money has to grow within tax-efficient structures.
2. Overlooking retirement fund deductions: Retirement funds remain the most powerful and accessible tax shelter available to South Africans. You can deduct up to 27.5% of your taxable income or remuneration (whichever is higher), capped at R430 000 per year, for contributions to your retirement annuity, pension, or provident fund. These deductions directly reduce your taxable income, and the returns within the fund grow free of dividends tax, income tax, and capital gains tax. Yet, many people contribute only the minimum required by their employer, leaving significant tax savings untapped.
3. Ignoring employer-based benefits: From our experience, too few employees take full advantage of the benefits available through their employers. Group retirement funds, group life and disability cover, and company-sponsored medical schemes often offer economies of scale that individual products are unable to match. Some employers even match employee contributions up to a certain percentage — effectively doubling your savings. The reality is that neglecting to review or maximise these benefits each year is like walking away from guaranteed returns.
4. Neglecting to use a tax-free investment account: The Tax-Free Savings Account (TFSA) remains one of the simplest tools for building long-term, tax-efficient wealth. Contributions are capped at R46 000 per year, with a lifetime limit of R500 000, but the investment growth and withdrawals are completely tax-free. Too often, investors ignore TFSAs because the contribution limit seems small, yet the compounding effect over time can be significant — especially when invested in growth assets. Using your TFSA allowance consistently each year ensures you build a portfolio immune to future tax drag.
5. Misunderstanding the new Two-Pot Retirement System: From September 2024, the Two-Pot System changed how South Africans access and contribute to their retirement funds. Under this system, one-third of future contributions go into a savings pot (accessible before retirement, subject to tax), while two-thirds go into a retirement pot (preserved until retirement). Many members misunderstand the rules around withdrawals or assume that accessing the savings portion is a tax-free event, which it isn’t. Keep in mind that premature withdrawals can erode long-term growth and increase your marginal tax rate in that year, meaning the best approach is to view the savings pot as an emergency fallback, not an invitation to dip into your retirement capital.
6. Ignoring Section 18A donations: South Africa’s tax code rewards generosity, yet many taxpayers overlook deductions available under Section 18A. In terms of this legislation, donations to qualifying public-benefit organisations are tax-deductible up to 10% of taxable income, provided you obtain an official Section 18A certificate. This means that credible charities or educational trusts allow you to reduce your tax liability while contributing to causes that align with your values. Note that for those with irregular income — such as business owners — strategic timing of donations can further optimise the deduction across financial years.
7. Failing to record capital transactions properly: In our experience, capital gains tax (CGT) can quietly undermine investment returns if not managed proactively. Keep in mind that the first R50 000 of capital gains each year is excluded, but beyond that, 40% of the gain is added to your taxable income. Many investors fail to track the base costs of their shares or unit trusts, resulting in over-reported gains and excess tax. Our advice is therefore to keep detailed records of every investment purchase and reinvested dividend. Further, if you are selling assets, be sure to time your disposals strategically — for example, spreading disposals across tax years to make full use of annual exclusions.
8. Over-claiming or misunderstanding deductions: It can be tempting to inflate deductions or misclassify expenses, especially when using self-help tax platforms. However, keep in mind that SARS’s digital systems and data-matching capabilities are increasingly sophisticated – and overstated travel claims, unverified donations, or vague “business expenses” can trigger audits or penalties. Our advice is to ensure all claims are legitimate, properly documented, and backed by receipts. Remember, it is far better to claim conservatively and maintain credibility with the tax authority than to invite unnecessary scrutiny.
9. Neglecting to review your investment structure: Very often, investors focus on returns while overlooking the tax treatment of those returns. It’s important to bear in mind that the type of investment vehicle you choose — discretionary, retirement, endowment, or tax-free — can dramatically affect your after-tax outcome. For instance, high-yield interest-bearing instruments are better held within retirement or endowment wrappers, while equity-based instruments may be more efficient in a discretionary portfolio. With this in mind, reviewing your investment structure annually ensures that your portfolio remains optimised for both return and tax efficiency.
10. Failing to seek professional guidance: Tax legislation evolves constantly, and the interplay between investment, estate planning, and tax can be complex – and attempting to manage everything alone often leads to missed opportunities and inadvertent errors. A qualified financial planner or tax professional can help you integrate tax efficiency into your broader financial plan — aligning your retirement contributions, investment strategy, and estate objectives under one cohesive framework. In our experience, the fee for sound advice is almost always outweighed by the long-term tax savings it produces.
Tax efficiency is not about exploiting loopholes or avoiding your fair share – it’s about being deliberate — ensuring every rand you earn, save, and invest works as hard as possible for your future. The new financial year brings with it a clean slate, and with careful planning, you can avoid the pitfalls that so often erode wealth quietly over time. Begin early, stay consistent, and make informed choices. After all, the most rewarding kind of return is not only financial — it’s the peace of mind that comes from knowing your tax affairs are in perfect order.
Have a fabulous day.
Sue
