Your Foreign Discretionary Allowance
Every taxpayer has an annual Foreign Discretionary Allowance (which runs from 1 January to 31 December), which allows them to spend/send rands out of South Africa.
You use this to pay for foreign purchases (like your Netflix subscription, when you spend money overseas or when buying on a foreign shopping platform), or you can use it to transfer rands to an offshore bank or investment account.
This allowance operates on a use-it-or-lose-it basis. That portion of your allowance you have not used during a year does not roll over for you to use it in the future.
The Constant Opportunity
By now, you may have a substantial portion of your FDA which can still be utilised. You can, very easily, invest this sum in an offshore investment as part of diversifying your investments.
The Other (Current) Opportunity
Between early April 2025 and the end of September 2025, the cost of buying one dollar decreased from about R19.78 to about R17.27. What that means is that every rand buys more dollars.
Put differently, if you had taken R500,000 in early April to buy USD, you would have received about $25,273, which you could have invested. On the other hand, if you bought USD at the end of last month, you would have received about $28,958, which you could have invested – more than 14% more.
And it’s not just against the dollar. Over a similar period, the rand has strengthened against the British Pound (by a little less), and the Euro.
Will the rand continue to strengthen between now and the end of the year when the FDA expires? We have no idea, but what we do know is that (a) diversifying your currency risk into non-Rand assets reduces your risks over time and (b) the opportunity to do so is (quite a lot) better now than it was in the first half of the year.
What should you do?
If you have not used all of your FDA this year, are likely not to and would like to chat with us about your options, please get in touch, and we will discuss them with you. And do it now. Don’t wait until the end of the year when everyone is on leave, and panic because you have not been really smart with your capital. Use the Constant Opportunity every year and take advantage of the Current Opportunity now.
You will be glad you did.
PS
In addition to your FDA you can also avail yourself of the Foreign Capital Allowance which will enable you to invest much more offshore. Give us a call if this interests you and will advise you on the details.