Although all interest accrues directly to the investor there is some benefit to this. Firstly, if your tax rate is under 30 percent then it becomes a 'no-brainer' as you will undoubtedly be in a better tax position.

What is more, SARS allows for certain exemptions when it comes to interest. For the tax year 2009/2010, the first R21 000 (under 65s) or R30 000 (over 65s) earned in interest is exempt from income tax.

So, in the example of interest, one could easily have up to R300 000 (assuming you?re under 65 and earning seven percent per annum) invested in interest bearing instruments without attracting any income tax. Take this one step further ? even if the next R300 000 is taxed at 40 percent, the overall tax position on the total capital amount would be an effective 20 percent (R300 000 not taxed and R300 000 taxed at 40 percent).

In conclusion, getting the highest interest rate is going to require some shopping around and looking at all the available vehicles. Before making a final decision, make sure you fully understand the taxation and costs associated with such a vehicle.

Please also remember that there are other considerations when selecting the right vehicle and one?s decision should not be based on tax alone. For this reason it is advisable that you seek the professional opinion of a Certified Financial Planner.

All the best.

acsis Limited is an authorised financial services provider. The response to the question covers some of the issues in a general and factual manner and does not constitute advice. It is important to consult with a financial planner who, after an analysis of the individuals? personal needs, goals and circumstances, will be able to provide comprehensive and appropriate advice.