How to ensure the tax legislation works for you

2018-03-01 06:00

By Juggie Govender of East Coast Financial Services (Pty) Ltd — FSP 44760

THE government, as part of its ongoing retirement reform process, continues to design policies aimed at encouraging South Africans to save and make adequate provision for their retirement. In its latest effort, the regulator has changed the tax treatment of contributions to retirement funds and simplified its calculations.

As of the beginning of the current tax year (March 1, 2018), the maximum tax deduction for all cumulative annual retirement contributions (whether into a retirement annuity fund, a pension fund or a provident fund) has increased to 27,5% of remuneration or taxable income — up to an annual maximum tax deduction limit of R350 000.

Increasing your monthly contribution to your retirement fund, or alternatively topping up your retirement annuity to the maximum allowable limit before the end of each tax year can make a significant difference to your retirement savings and boost your tax savings.

You can invest up to 27,5% of your taxable income, or gradually increase your percentage from year to year. Additional contributions can be made monthly, and spread over the year, or annually when you have extra lump sums. Due to the tax deductions on contributions, the impact on disposable income is much lower than expected.

Even though you may be contributing to an employee retirement fund, it doesn’t mean that you can’t benefit from the tax advantages of contributing to an additional retirement savings vehicle.

Some individuals who already contribute to an employee retirement fund may have opted not to contribute to an additional retirement fund given the difficulty, under the previous regulation, to determine whether contributions to the additional retirement vehicle fund qualified for tax deductions.

The new regulation removes this complexity, encouraging more investors to take control of their own retirement savings outside of employee schemes and invest additional amounts into retirement annuity funds.

Now is an opportune time to determine how much you should be adding into your retirement annuity before the end of the tax year to take advantage of tax breaks.

The 2017/18 tax year ends on 28 February, 2018.

This means you only have a few weeks left to maximise the contributions you make to your retirement annuity (RA) fund, and use tax legislation to your advantage to boost your retirement savings.

Depending on your tax rates, you can get a rebate of between 18% and 45% of your contribution

Let us help you navigate turbulent times.

This article, is an excerpt from PPS Hugo Malherbe, executive of product marketing

You can contact me at 083 399 3905, my office at 032 944 3051 or e-mail me at juggieg@telkom for an appointment or further information and any other financial advice.


The information is only intended to be of a general nature and should not be relied upon by any part without obtaining full details from a licenced financial service provider .


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