While family tax is a reality in South Africa, without proper planning funds can run thin

Published: Thursday, October 1, 2020

Business Banking EconomyFinancial Services Accountancy

Affinity Enterprises says that it expects South Africans to take a substantial hit in the last quarter of the year, as Family Tax begins to bite.

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Given the substantial uncertainty brought by this year, Family Tax can put added pressure on professionals to not only provide for their immediate families but their extended families as well. There is a great deal of stress that goes hand-in-hand with the responsibility to support your extended family while at the same time build your career and try to attain and manage  personal cash flow. Funds can run thin.

Family tax is familiar to many South Africans. A 2017 survey showed that of the respondents who earned under R6 000 per month, 26 per cent were expected to support their parents and children. Another study last year revealed that 58% of respondents send money home to family (primarily parents and siblings) even in contexts where 32% were never or often unable to meet their monthly obligations.

“December is just around the corner and for many South Africans that means added pressure in the form of family financial obligations. Family Tax is a topic that is no longer swept under the carpet, and it is a reality many cannot escape from. There are, however, ways to avoid the holiday-season financial stress trap,” says Murray Hewlett, CEO of Affinity Enterprises. 
“While many South Africans cannot avoid paying Family Tax, they can find ways to better navigate their finances in a way that helps them support their families without ignoring their own needs. Getting a big-picture of your finances, knowing what you can afford – and want – to give, and then having the conversations with your family is important. It’s better to be open and honest to manage expectations and safeguard your financial wellbeing. Holiday contributions to household essentials can still happen, but it needs to be within the constraints of your spending plan.”

Hewlett recommends going through your last three bank statements with a fine-tooth-comb to understand your spending habits. Get an overview of your debts, overall income, and expenditure. Then grab a calendar and diarise your travel dates and any upcoming family events like weddings, engagements, birthdays, anniversaries, graduations, etc. Work alongside a financial adviser to set up a budget, taking into account the holidays and celebrations you’ll need to save for. 
If you can afford to do so, consider sponsoring a family member’s medical aid contributions, or putting them onto your medical aid as a dependent, rather than making lifestyle contributions. Think of formalising this by drawing up a contract of sorts, with specific milestones a family member has to meet for you to continue sponsoring them – like passing their first year of varsity, as an example. 
“With no end in sight to the coronavirus crisis, many South Africans have faced job losses and are under huge financial pressure. As a trusted South African company, we aim to make affordable healthcare available to everyone during this difficult time. Looking at the health segment specifically, we’ve designed affordable family packages,” concludes Hewlett.

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