Stashing whisky, not RAs

VARIOUS investments take advantage of the capital gains tax exemption on the disposal of personal assets and collections that may include coins, guns, cars, stamps, diamonds, small boats and aircraft.

The attraction is that the investor can at least enjoy the use of the asset, instead of aimlessly perusing paper.

However, this strategy often ignores the fundamental investment principle – if it has wheels or propellers, rather hire it.

I tried building up a whisky stash instead of making retirement annuity fund contributions.

I predicted that the future savings in VAT, sin tax and CGT on “disposal” would far exceed the value of a tax deduction on contributions to an RA.

Unlike RAs, there is no preservation requirement on a whisky collection, so the whisky is gone long before my 55th birthday. This proves that the power of pension fund regulations is greater than the power of the bottle.

I also have a gold coin. Every time the gold price increases I nearly have a heart attack, wondering where the hell I put it. The same coin is offered in shop-front windows for R35000. Wow! Gold returns have really clobbered the whisky price index.

Do I now sell the gold coin and take the CGT exemption, then revive the whisky collection before the price of the golden liquid is taken beyond my means by the inevitable sin-tax increases and a post-Marikane exchange-rate plunge?

The responsible me would invest the proceeds in an RA and squander the tax saving on next year’s whisky supply.

If I really wanted to be responsible about my future frail-care incarceration I should sell the coin, contribute the proceeds to an RA and then reinvest the tax benefit ad infinitum.

The irresponsible me says laugh it off, set the coin in a navel stud and give it away to a friend.

Imagine a belly button emblazoned with a gold image of Madiba and inscribed “the long walk to freedom”?

Originally published in the Sunday Times: Money & Careers Tax Talk column.


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