20th July 2016
This article by MSI accounting member Newtons Chartered Accountants provides an insight into the current taxation of pension funds in South Africa.
Some controversy surrounds one of the most significant amendments that would have been effected by the Taxation Laws Amendment Act, 25 of 2015, and the Tax Administration Laws Amendment Act, 23 of 2015, being how retirement type funds would have been taxed in future. This includes both the taxation of proceeds from funds, as well as the extent to which the amounts contributed to funds throughout will be deductible for income tax purposes.
Although the reform process has been the subject of consultation since 2012, certain key proposals have recently, due to lobbying from the trade union movement specifically, been postponed to 1 March 2018 to allow for further consultation. What was proposed initially and has been enacted since: It is important to distinguish upfront between 3 types of funds, being pension funds, provident funds and retirement annuity funds. Historically, in terms of the Income Tax Act, 58 of 1962 (the Income Tax Act), contributions made to pension funds were deductible, limited to 7.5% of the individual’s particular annual pensionable salary.
Whereas pension funds are designed to allow for the accumulation of wealth of salaried individuals towards retirement, retirement annuity funds aim to provide for non-salary income to be saved towards retirement. To this end, 15% of non-pensionable income (e.g. income from an own business) contributed to a retirement annuity fund were previously allowed as income tax deductions.
Read more about Reform on the taxation of pension funds in South Africa
Newtons is a local Bloemfontein audit firm since 1903 and strive for excellence in all fields. We are dedicated to providing impeccable service to all our clients.
View firm profile
Our new 'Doing Business in Malaysia' guide is now available for download from our website. View the MSI Global Alli… https://t.co/TspMLCfvbF
Europeans rather than Americans are most-diverse companies https://t.co/FcZ8WZFbXS #diversity
The Law Society of England and Wales has backed a new free online education resource aimed at future #lawyers https://t.co/mg0me9aa6P