The Tax Mistake I Didn’t Know I Was Making
I used to think tax was just one of those things you couldn’t escape. You earn money, SARS takes their share and whatever is left is what you’re allowed to build a life with. Almost like a penalty for doing well. I never really questioned it - I just assumed that was the game.
It wasn’t until I started earning more consistently that I realised something didn’t sit right with me. Every increase in income felt good on paper, but emotionally it came with pressure. More responsibility. More stress and... more tax. It felt like the harder I worked, the more of my effort disappeared before it even had a chance to compound. That’s when I started paying closer attention to the rules instead of just reacting to the outcomes.
What I discovered is that South Africa’s Income Tax Act doesn’t just exist to take money from you. It also quietly gives you options... if you know where to look. One of the most powerful and most misunderstood, is the ability to contribute a portion of your income into a Retirement Annuity and deduct that contribution from your taxable income. In simple terms, you’re allowed to redirect part of what would have gone to tax into your own long-term capital instead.
This was a mindset shift for me. I stopped seeing an R. as a “retirement product” and started seeing it as a tax positioning tool. The law allows you to contribute up to 27.5% of your taxable income each year, capped at R350,000. That contribution reduces the income SARS taxes you on. You’re not avoiding tax. You’re choosing where a portion of it goes. Instead of disappearing into the system, it starts working for your future self.
When I ran the numbers properly, it became very real. If you’re in a higher tax bracket, every rand you contribute to an RA effectively costs you less than a rand, because part of it would have gone to tax anyway. That difference isn’t theoretical. It shows up as lower tax payable or a refund when you submit your return. Over time, that’s meaningful capital that stays inside your ecosystem.
What made this even more compelling is what happens once the money is inside the RA There’s no tax on interest, no tax on dividends and no capital gains tax while it’s invested. Compounding without friction is powerful, especially when you give it enough time. Most people underestimate how much tax quietly erodes their long-term returns. Removing that drag changes the trajectory completely.
The practical side turned out to be far simpler than I expected. You open a Retirement Annuity through a regulated provider, decide how and when you want to contribute and then declare those contributions when you submit your tax return. The provider issues a certificate, SARS applies the deduction and the system does the rest. There’s no complicated strategy. Just intentional structure.
That said, I also learned what an RA is not. It’s not a trading account. It’s not liquid capital you can dip into when emotions run high and it’s not something you use in isolation. For me, it became one pillar in a broader structure - alongside active income and investments. The value wasn’t just in the tax benefit. It was in the discipline it forced. The separation. The long-term thinking.
Looking back, the biggest cost wasn’t the tax I paid before understanding this. It was the years I didn’t know I had a choice. Most people aren’t taught this at school. Many never hear about it until their 40s, when time is already working against them. That’s not because the information is hidden - it’s because no one explains it in plain language.
Understanding the Income Tax Act won’t make you wealthy overnight. But misunderstanding it guarantees inefficiency. Once I stopped treating tax as an uncontrollable expense and started treating it as a variable within a system, everything changed.
This isn’t about gaming the system. It’s about understanding the rules well enough to stop playing blindly and for anyone earning income in South Africa, realising that you can legally redirect part of your tax into your own future is one of those quiet insights that changes how you think forever.
— Zack Rens
The Young Founders Report
