TFSA Rules Explained: What You Need to Know

The Contribution Rules

Understanding TFSA contribution rules is essential to maximize benefits and avoid penalties.

Annual Limit

You can contribute up to R36,000 per tax year (March 1 to February 28/29).

Key points:

• The limit is per person, not per account
• You cannot carry unused contributions to the next year
• The limit includes all your TFSA accounts combined

Lifetime Limit

The total amount you can ever contribute is R500,000.

This is a cumulative total of all contributions you've ever made, regardless of:

• Withdrawals you've made
• Growth in your account
• Losses you've experienced

Withdrawal Rules

TFSAs have flexible withdrawal rules:

• No penalties: Withdraw anytime without penalties
• No waiting periods: Access your money when you need it
• No tax: Withdrawals are completely tax-free

What Happens If You Over-Contribute?

Over-contributions attract a 40% tax on any returns earned by the excess amount.

For example:

• If you contribute R40,000 (R4,000 over the limit)
• And that R4,000 earns R400 in returns
• You'll owe 40% × R400 = R160 in tax

Allowed Investments

Not everything can go into a TFSA. Allowed investments include:

Yes:

• Exchange-Traded Funds (ETFs)
• Unit trusts
• Retail Savings Bonds
• Fixed deposits
• Certain listed shares

• Direct property
• Cryptocurrency
• Foreign investments not listed on JSE
• Derivatives

Multiple TFSA Accounts

You can have TFSAs with multiple providers, but:

• Your combined contributions cannot exceed R36,000/year
• Track your total contributions carefully
• Each provider reports to SARS individually

Transfers Between Providers

You can transfer your TFSA from one provider to another:

• The transfer doesn't count as a withdrawal
• It doesn't use up contribution room
• Follow the formal transfer process (Section 14 transfer)

TFSA for Children

You can open a TFSA for your child:

• The contribution limits apply to the child, not the parent
• The parent manages the account until the child is 18
• Great for long-term education savings

Death and TFSAs

When a TFSA holder passes away:

• The account becomes part of the estate
• No estate duty on TFSA assets
• Beneficiaries receive the funds tax-free

Key Rules Summary

1. Maximum R36,000 per year
2. Maximum R500,000 lifetime
3. Withdrawals are tax-free but don't restore limits
4. 40% penalty on returns from over-contributions
5. Only approved investments allowed
6. Multiple accounts allowed but limits are combined