- Dual CEOs at Investec (JSE codes: INL / INP)?
- Market sells off and rebounds (a bit) and we're in correction territory (down 10%).
- The falling property stocks of Resilient, Nepi Rockcastle, ForstressB & Greenbay (JSE codes: RES, NRP, FFB & GRB) continue to trade down at the low levels they hit when Viceroy concerns initially hit the market in early January.
- Capitec* still under fire from Viceroy and share likely to be subdued for a while.
- Brimstone (JSE code: BRN) has sold down their stakes in both Tiger Brands (JSE code: TBS) and Life Healthcare (JSE code: LHC). Now what will they do with the R750million cash?
- Stress free tax year
- Up-coming events
* I hold ungeared positions.
Section 12J (S12J)
Introduced in 2009 this enables a tax payer to invest into a startup (via the S12J fund, Section 12J Venture Capital Companies (VCC)) and claim it as a deduction on their tax return effectively reducing ones income by the amount invested. An important point is that the investment has to be held for 5 years or income becomes taxable.
In theory nice but with some buts;
- Firstly investing in startups is high risk - of course it is.
- That said you can invest in lower risk and more mature companies, know what you're investing into.
- Exiting at the end of five years may be a challenge. How does one sell a stake in a startup? They could list but if not liquidity is going to be a potential problem. Check how the fund plans to manage this and how it has worked in the past.
- Check the numbers very carefully. I've seen a lot S12J companies working the returns off R550k when you made a R1million investment. The theory is that they include the R450k tax saving into the return. Sure, but where did the R450k go?
- Know what you're investing into. This is much harder then listed investments as they're startups and we have limited information and hence valuations are hard.
- Get to grips with all the fees, all of them, in lots of detail.
- Quality and track record of the VCC managers.
- Bottom line is that there are good and bad in S12J. Make very sure you know which you're getting into.
- Lastly, saving tax is never a good enough reason on its own for an investment.
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