The recent volatility and massive declines across both local and global markets due to COVID-19 as well as the sharp decline in the oil price, has overall had a very negative impact on both the economy as well as investment returns.
However, while the current situation may be bad news for the overall performance of your portfolio, from a tax perspective (particularly capital gains tax) it could actually provide you with a sweet-spot to make changes, as the tax implications will be much lower.
Given the recent volatility on the JSE due to the Coronavirus pandemic, it may be very tempting for you, as an investor, to pull out of equities and switch to cash. The last few weeks have been tough for investors. After a day of steep declines, markets recover for a short while, only to have them decline again.
National Treasury has just delivered the 2018 Budget Review. Again, due to a persistent Budget deficit, certain taxes were raised. An increase in VAT to 15% is the headline story, but for individuals in the top four income tax brackets the range of the income brackets was not adjusted for inflation. In effect, your clients will therefore have less real income left after tax in the coming year.
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