Podcast: TFSA strategy

Kristia van HeerdenLatest, The Fat Wallet

Christmas is the most wonderful time of the year, but tax month is a close second. For buy-and-hold investors like myself, this is the only time of year I get to do anything significant in my portfolio. That’s why I take a moment to reflect on my portfolio every February.

My tax-free strategy may seem static from the outside, but it has changed as new products have come into the market and as I’ve matured in my investment philosophy. The market is a highly dynamic environment and even a buy-and-hold strategy requires sharpening every so often.

In honour of tax-free savings month, we think through tax-free investment strategies in this week’s episode, with the help of a few listener questions.

The bleeped show is below.


I am asking on behalf of my daughter (turning 30!) regarding her tax free investments.

Are there any recommended changes for 2021 to the high risk etf portfolio.


I am 30 years old and have recently started worrying about my future financially. Until now, I have been using most of my savings to pay off as much as possible into my bond. I have also been contributing to my pension fund. 

I’ve gotten to the point where I can finish paying off my bond in about two years and I have that additional money to put towards my investments.

Should I continue to pay extra into my bond and pay it off in my two-year timeframe or rather put more into other investments?

Any advice on what to do with that extra money?

 I recently opened a TFSA started putting 60% in Ashburton 1200 and 40% into Satrix Top 40. I plan on putting the maximum monthly amount in there but not really sure of what ETFs to invest in. 

I then plan on putting the money left over into ETFs but am unsure of which ones – I have thought of adding MSCI Emerging markets or maybe Dividend Aristocrat. Also, is it worth adding bonds into the mix? 


I like how Kristia pronounces her name as KRIS-tia while Simon pronounces it as Kris-TIA with emphasis on the last three characters. Have you guys noticed? Just love it 😊. 

Thank you for your contribution to my getting my act together as it relates to finances. Towards the end 2020 I became debt free and I am never going back to debt for anything. It has been a long 4.5 years’ journey, but very rewarding. Thank you for your service to the community. 

Anyway, my question is this. Why / How does it happen that the same ETF, Ashburton 1200 for example, can be green in my normal ZAR account, while it is red in my TFSA account or vice versa? Does the different amount in both ‘accounts’ matter?


Like many Fatties I am a pet lover. Many decisions I have made about my dogs are purely irrational, but hit the budget really hard. I want to share a summary of my recent pet experience just to alert people about what they can prepare for in terms of how hard a pet can hit your budget. 

I have an 11 year old basset hound named Rossie. He is low cost and low admin. Loving, gentle, healthy and clever. A perfect dog. We realised that Rossie doesn’t have many years to go and decided to phase a younger pet in so that when Rossie kicks the bucket we have pet continuity. 

Rossie: the perfect dog

Wanting to be a good person, I opted to get a rescue from the SPCA and chose a lovely mixed breed something named Lucy. The entire adoption process cost me about R800  as the SPCA sterilise and vaccinate the pet too.  Lucy arrived home on a Thursday  and by Saturday there was a dog fight. Rossie ended up at the Vet. With after hours rates his treatments for his bites including meds were R2.5k. He is not on pet medical aid because he has had a very good track record and in most cases my emergency fund could cover his expenses easily. 

A day later we found out that our rescue Lucy could easily scale the wall and visit our neighbours. 3 quotes later this was another R8k in expenses to raise our wall on one side. With the 2 dogs not getting along we decided to get a pet trainer in to assist us in managing the transition. The total bill for pet trainer was R2k for 2 sessions. 

Lucy: a menace

Yes, in 7 days our new pet had cost us upwards of R13k. Deep down I know more drama is coming.  The rational option is to get rid of her and return her to the SPCA, but the emotional option is to try everything we can to integrate her and give her a home. The latter option costs money. Fatties, when the day comes…be prepared. Pets can be very expensive. Second, get pet cover. Even if it’s just the cheap accident version. Lastly, don’t expect to think rationally once you have the pet.


I am 38 and receive a non-taxable disability income through group insurance. 21% of the total non-taxable amount goes into my provident fund directly from the Insurer and the balance I receive as a non-taxable salary.

I have no other retirement products, but have opened a RA for my wife over and above her pension fund to maximise tax returns.

A few years ago, I withdrew money from my first preservation fund to buy our house cash and save on the interest over 20 years.

I am working towards a balanced portfolio (TFSA, unit trusts, shares) across all asset classes. I am wondering if I should open an RA to manage tax post retirement with contributions that carry over. 

Scenario 1:

I create taxable income with our Airbnb flat rental and keep rental income very low, i.e. R1000 for each year for the next 20 years.

I open a low cost RA and contribute as much as possible each year.

The contribution builds up at SARS for the next 20 years.

At age 60 I convert my provident fund into a living annuity and then draw income which is taxable.

I can reduce my taxable income by 27.5% which is taken from the contributions that didn’t previously qualify until that’s depleted. The time frame can extend depending on whether I continue to contribute to the RA post retirement.

This RA also provides options where I then have two retirement products to be converted to different annuities if needed.

Scenario 2:

Instead of trying to manage future tax liability, I don’t open an RA and invest into high equity products.

I am thus not bound by Reg28 and may have a significantly return higher. This higher return could far outweigh the over contribution in the RA I would have built up as an example. However, there is no tax benefit post-retirement as I would be in a position to live from an annuity anyway which is taxable.

This scenario seems from a returns perspective better, but from a tax management perspective not so.


I am a provisional taxpayer and must submit a second period estimate by February 2021.

– I have”received” my first interest payment in September 2020, so I know what to report to SARS.

– But I don’t have clarity on how Treasury will reflect the interest from October 2020 to February 2021. Remember, it only gets paid in March 2021 (in the next tax year).

– Will they apportion 5 months worth of interest in my 2020/2021 IT3b, or nothing at all, as it is not “in my hands” as yet? 

– Remember that there is also an option to exit early (with a good excuse), so Treasury does not know in advance what I might do.

I remind you that there was, a couple of years ago, a change in tax rules, which forced FSPs to report not only just the interest capitalised, but also interest accrued (but not yet capitalised).

So, for a normal deposit with a bank, it is easy: Your IT3b shows both interest capitalised and interest accrued thus far, even if the capitalisation of the accrued portion only happens in the next tax year.

But this wonderful product from Treasury is a special child that might get special treatment, especially given all the wonderful optionalities that come with it (such as early exit and resets).

My tax practitioner does not know the answer. (Apologies to the Fat Wallet community for admitting that I actually have and pay one, that can’t even answer this question. I cut costs where I can, but tax is difficult.)

I’ve also approached the RSA RSB helpdesk for an answer, only to get the following nonsensical response: “Please note that you will only receive a Tax certificate in 2021 [duh, sic], the certificate covers for both reinvested interest and paid out interest.”


I hold a bit of the CloudAtlas Africa Big50 ETF (AMIB50) in my discretionary portfolio & I came across a disturbing titbit hidden away at the bottom of their fund fact sheet (attached). 

While the TER in the summary is 0.85% (already quite high but understandable given the illiquidity of other African markets), another TER of 7.32% 🤯 is provided right at the end, incorporating a bunch of different fees & ‘dividends not distributed’. I had to do a double take because this is more than triple the fee of an average actively-managed unit trust. l

Is this really what I am paying as a retail investor to hold this security or am I missing something? If the latter TER is the real one, it would likely wipe out any long-term gains from the investment, even with its supposed growth potential. The fact sheet also gives a bizarre asset allocation of 70.8% Cash & only 29.2% Equity, which I am struggling to comprehend. 

I understand CloudAtlas is a smaller boutique company but surely this needs some clarification for investors. I would appreciate if you and Simon could unpack this as it is a real head-scratcher for a novice investor like myself!

Cloud Atlas’ Maurice Madiba says,

“We are required to disclose all the fees going off the fund which includes Audit, Administration, Custody fees, Index fees etc expressed as a percentage of fund size. Some of these fees are variable like our management fee at 50bps and custody fee at 35bps but the others are fixed.

Last year the fund size reduced dramatically because of two factors: market movements and redemptions which significantly increased the fixed costs expressed as a percentage of fund size. We are exploring the options to curtail the costs and will provide more details.”


Where does Simon invest for his niece and nephew? Are the accounts in their own names or in his name?

I opened an ETFSA account about 6 years ago for my special needs grandchild who will be 9 this year.  It’s not a tax free account.  It’s in his name, with his mother’s details and bank account listed and the R500 monthly debit orders are paid from my bank account.   It’s still administered by AOS and I find them extremely painful to deal with.  Simple things like changing his mother’s physical address and bank account is taking a ridiculously long time to process even with the correct FICA documents.

I have various accounts with Easy Equities, I enjoy the simplicity of the app and wonder if I should open a TFSA account for my grandchild with Easy Equities and invest into that in future. I’m 67 but hope to keep this up as long as possible.  I can’t decide if I should just cancel the debit order on the old account and leave the existing ETFs on the AOS platform or should we redeem them over two tax years (R75000 total value) to fund the TFSA and avoid any CGT.  Hopefully his mother won’t spend the money in between!!

If I’m going to start closing the EFTSA AOS account I need to take action fairly quickly to redeem the first lot before the end of this tax year.

The Fat Wallet Show with Kristia van HeerdenThe Fat Wallet Show is a no-nonsense personal finance and investment podcast hosted by Kristia van Heerden and Simon Brown. Every week we answer questions by a growing audience of finance enthusiasts. Submit your pressing money and investment questions to ask@justonelap.com.

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