Project a unit-trust investment and estimate dividends tax and CGT on the growth.
Net value after all tax
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Gross value
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Dividends tax
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CGT at sale
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A long-term investment with two tax bills
A discretionary unit trust, the kind you buy outside a tax-free account or retirement fund, grows in two ways and is taxed on both. While you hold it, the fund earns dividends and interest, and dividends carry a withholding tax. When you eventually sell, the price growth is a capital gain, and a portion of that gain is added to your income and taxed. This calculator projects a monthly unit-trust investment to a future value, then estimates both tax drags so you see a net figure rather than a flattering gross one. You enter your monthly contribution, the years invested, an expected total return, a dividend yield, and your other taxable income.
It is built for an investor comparing a plain unit trust against tax-sheltered options and wanting an honest after-tax number. The gross value is the easy part. The value of this tool is that it does not stop there, because the difference between gross and net over a couple of decades is large.
How dividends tax and CGT are modelled
Dividends are hit by a 20 percent dividends withholding tax. The calculator estimates this each year by taking your average balance, multiplying by the dividend yield to get the dividends earned, and applying 20 percent. This is an estimate of the drag along the way, not an exact figure, because the yield sits inside the total return you typed and the model does not reduce growth by the dividends paid out. On the capital side, when you sell, the gain above the annual exclusion of R40,000 has 40 percent included in your taxable income, and that included amount is taxed at your marginal rate. The 20 percent dividends rate, the 40 percent inclusion, and the R40,000 exclusion are the figures this calculator applies, all of which are worth confirming against SARS, the South African Revenue Service.
R3,000 a month for 20 years at 11 percent
Consider R3,000 a month for 20 years at an 11 percent total return, a 3 percent dividend yield, and R450,000 of other income. The projection grows to a gross value of about R2.62 million on contributions of R720,000. The estimated dividends tax along the way adds up to roughly R104,000. At sale the capital gain is about R1.9 million, of which R744,000 is included after the R40,000 exclusion, producing CGT of around R287,000 once stacked on your R450,000 income. Net of both taxes, you keep about R2.23 million.
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What the projection glosses over
Three caveats keep you honest. First, the return is nominal, so R2.23 million in 20 years is worth far less in today's spending power. Second, the dividends-tax figure is an approximation that assumes a steady yield and average balance; your real fund distributions will vary year to year. Third, the model treats the entire gain above contributions as a capital gain realised in one sale, whereas in reality switching between funds can trigger CGT events along the way and interest earned inside the fund is taxed differently from dividends. Read the net number as a reasonable estimate of the after-tax outcome, not a guaranteed result.
Who benefits from running this
It suits anyone deciding where to put long-term savings and weighing a taxable unit trust against a tax-free savings account or a retirement annuity. The eye-opener is usually the size of the combined tax drag, which is exactly why the annual R40,000 CGT exclusion and the tax-free account matter so much. A practical tip is to use this alongside the TFSA versus taxable tool: realising small gains each year to use the annual exclusion, rather than one giant gain at the end, can cut the CGT meaningfully. The common mistake is comparing investments on gross returns alone and ignoring that a tax-free wrapper escapes both of the taxes shown here.
Is interest earned inside the unit trust taxed the same as dividends?
No. Interest is taxed in your hands at your marginal rate, though you get an annual interest exemption first, currently R23,800 for those under 65. Dividends face the separate 20 percent withholding tax. This tool focuses on the dividends-tax and CGT drags, so if your fund holds a lot of interest-bearing assets, factor the interest tax in separately.
Do I pay CGT every year or only when I sell?
Capital gains tax is triggered on disposal, so generally only when you sell units or switch between funds, not simply because the value rose on paper. That is why holding a unit trust for the long term defers the CGT. Switching funds, even within the same manager, usually counts as a disposal and can crystallise a gain, so check before you rebalance.