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Offshore Allowances Before Year-End: What the R2 Million SDA Means for Your Strategy

For many South African investors, offshore diversification is no longer a question of whether.

It is a question of how much, how and when.

The 2026 Budget made that question more relevant.

The single discretionary allowance (SDA) was doubled from R1 million to R2 million per calendar year.

With the end of the year approaching, and allowances resetting on 1 January, now is a good time to review how your offshore strategy fits into your overall financial plan.

A Quick Recap of the Allowances

South African tax residents currently have two main annual allowances for moving funds offshore.

The single discretionary allowance (SDA) allows adults to transfer up to R2 million per calendar year without requiring prior approval from SARS. It can be used for a range of purposes, including travel, gifts and offshore investment.

The foreign investment allowance (FIA) allows a further R10 million per calendar year. This requires an Approval for International Transfer (AIT) from SARS, which confirms that the individual’s tax affairs are in order.

Together, this means an individual may be able to move up to R12 million offshore per calendar year, subject to meeting the requirements.

Allowances Do Not Carry Over

Both allowances operate on a calendar-year basis.

Any unused portion falls away on 31 December.

It cannot be added to the following year’s allowance.

For investors with a long-term plan to increase offshore exposure, this makes it worth considering whether the current year’s allowance has been used in line with that plan.

That said, an allowance expiring is not, on its own, a reason to invest. The decision should still be driven by your goals, risk profile and overall portfolio.

Why Offshore Diversification Matters

South Africa represents a small fraction of global equity markets.

Investing only locally means concentrating exposure in:

  • One economy
  • One currency
  • A relatively small number of large listed companies
  • A specific political and regulatory environment

Offshore diversification can provide access to:

  • Industries and companies not well represented locally, such as large global technology and healthcare businesses
  • Different economic cycles
  • Hard-currency assets that can protect purchasing power for future offshore expenses

Diversification, Not Speculation

Offshore investing is not about predicting the rand.

Trying to time currency movements is extremely difficult, and many investors who wait for a “better” exchange rate end up delaying decisions indefinitely.

A more disciplined approach is to decide on an appropriate long-term offshore allocation and work towards it gradually.

Phased transfers over time can help reduce the risk of moving a large sum at an unfavourable point.

Direct Offshore or Rand-Denominated Exposure?

Investors can gain international exposure in two broad ways.

Direct offshore investment involves physically moving money out of South Africa using the SDA or FIA, and investing in foreign-currency assets held offshore.

Rand-denominated offshore exposure involves investing in local funds or instruments that invest in global assets. These do not use your personal allowances.

Each approach has advantages and limitations, including differences in:

  • Currency of the investment
  • Estate planning and offshore wills
  • Access to funds
  • Costs and reporting
  • Exposure to future exchange-control changes

The right mix depends on your objectives.

Consider What the Money Is For

Offshore investment should be linked to specific goals.

For example:

  • Funding children’s future education abroad
  • Planning for retirement offshore
  • Building long-term hard-currency wealth
  • Diversifying risk within a multi-generational wealth plan

Clear objectives help determine how much should be invested offshore, in which currency and over what time horizon.

Tax and Compliance Matter

Moving funds offshore does not change your tax obligations as a South African tax resident.

Income and capital gains on offshore investments generally remain taxable in South Africa and must be declared.

Before using the FIA, you will need:

  • SARS eFiling registration
  • Up-to-date tax returns
  • An approved AIT application, which provides a PIN your authorised dealer will use to verify compliance

Leaving the AIT application until late December can create delays. If you intend to use the FIA this year, starting early is sensible.

Estate Planning Considerations

Offshore assets can complicate estate administration if they are not properly planned for.

Depending on the jurisdiction, heirs may face:

  • Foreign probate processes
  • Additional legal costs
  • Delays in accessing assets
  • Foreign estate or inheritance taxes

An offshore will and appropriate ownership structures may help simplify matters.

Foreign Exchange Execution Matters Too

How funds are moved can affect the outcome.

Factors to consider include:

  • Exchange rate spreads
  • Transfer fees
  • Documentation requirements
  • Turnaround times

Working with a provider that understands both the investment and foreign-exchange process can help reduce friction.

Questions to Ask Before Year-End

  • Have I used my SDA for this calendar year, and does that align with my plan?
  • Is my current offshore allocation where I want it to be?
  • Do I intend to use the FIA, and is my tax compliance in order?
  • Am I investing offshore for a clear reason, or reacting to headlines?
  • Have I considered estate-planning implications?

The 98 Degrees Group Approach

98 Degrees Group provides multi-managed portfolio management, foreign exchange and risk and investment management services for private clients and institutions.

We help clients:

  • Determine an appropriate offshore allocation within their overall strategy
  • Use annual allowances in a structured, disciplined way
  • Manage currency execution and the practical transfer process
  • Integrate offshore assets into long-term wealth and estate planning

This article is for general information only and does not constitute financial advice. Speak to a qualified financial adviser about your personal circumstances.

Explore our Multi-Managed Portfolio & Wealth Management services.

Plan the Allocation, Not Just the Transfer

The higher SDA gives South African investors more flexibility.

But flexibility is only valuable when it is used with purpose.

Global diversification works best as part of a plan, not as a once-off reaction.