The inflation rate has edged down improving the real return you can get on cash deposits or money market unit trusts.
The real rate of return you receive on your money is affected not only by the inflation rate but also by tax rates.
To work out a real rate of return you need to subtract both the inflation rate and the tax you will pay on interest from a quoted interest rate.
For example, with the inflation rate now running at 9,5 percent, if you have a marginal tax rate of 45 percent (this clicks in when you have a taxable income of R100 000 or more) you will need to get an interest rate of more than 17,3 percent to make a real return on your investment.
Last month when the year-on-year inflation rate was 19,9 percent you needed to get more than 18 percent on your money to be making a real return.
The lower down the tax tables you lie, the lower the interest rate you require to get a real rate of return on your cash deposit or money market unit trusts.
The calculations in the accompanying table ignore the fact that the first R2 000 you earn in interest is tax free.
Any amount 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 TAX BRACKETMARGINAL TAX RATEBREAKTHROUGH POINT
R0-30 00019%11,7%
R30 001-R35 00030%13,6%
R35 001-R45 00032%14%
R45 001-R60 00041%16,1%
R60 001-R70 00043%16,7%
R70 001-R100 00044%17%
R100 00145% 17,3%