The 0,5 percentage point drop in the inflation rate to 7,5 percent for the year ended October is a boon for interest-earning investors.
With high interest rates and low inflation, investors, for the first time in many years, are getting real after-tax and after-inflation returns on their money.
To get a real rate of return you need to subtract the inflation rate and calculate in your marginal rate of taxation from the interest rate you are offered to see if your money is actually growing.
The lower the inflation rate and your marginal rate of taxation the better your real rate of interest.
The calculations in the accompanying table ignore the fact that the first R2 000 you earn in interest is tax free.
Any interest you receive above R2 000 is taxed at your full marginal rate of taxation.
The table provides marginal tax brackets with the marginal rates and the interest rate at which you will start to get a real rate of return on your money.
YOUR GOLDEN INTEREST RATE
Marginal
Marginal
Breakthrough
Tax Bracket
Rate
Point
R0-30 00019% 9,3%
R30 001-R35 00030% 10,7%
R35 001-R45 00032% 11%
R45 001-R60 00041% 12,7%
R60 001-R70 00043% 13,2%
R70 001-R100 00044% 13,4%
R100 00145% 13,6%