Govt proposes to promote savings
Cape Town - The National Treasury released two papers on promoting household savings for public comment and consultation on Thursday. The two papers, Incentivising non-retirement savings, and Improving tax incentives for retirement savings are available from the National Treasury website (www.treasury.gov.za).
At its 19 September 2012 meeting, the Cabinet noted that the promotion of household savings and the reform of the retirement industry were aimed at assisting and incentivising South African households to save more, particularly for their retirement, and to better preserve and grow their pensions.
Incentivising non-retirement savings
This paper proposes a non-retirement savings product which is supported by tax incentives. The aim of the savings product is to support voluntary savings by households and complement retirement savings.
The paper proposes:
- Tax free returns, growth and withdrawals;
- Limiting contributions to R30 000 per year and R500 000 over the lifetime of an individual. These limits may be adjusted from time to time to take into account inflation.
- Expanding on the current tax-free interest income regime by replacing it with products that will offer more investment options.
Improving tax incentives for retirement savings
This paper proposes to simplify the current tax regime by harmonising the tax treatment of contributions to retirement funds. Proposals to simplify the current regime and thereby address its deficiencies were initially announced in the 2011 and 2012 Budgets.
The paper proposes that:
- Contributions by employers to retirement funds remain tax deductible for taxable employers;
- Employer contributions be taxed as a fringe benefit in the hands of the employee; and
- Employee contribution, for tax purposes, be deemed to be made up of both the employee and the employer contributions, and the total contribution be capped at R250 000 or 22.5% of taxable income for taxpayers 44 years and younger. A cap of R300 000 or 27.5% of taxable income will apply to those aged 45 years and above.
The closing date for comment on these two papers is 30 November 2012. Comments on these papers can be submitted as follows:
- Submissions on the Incentivising non-retirement savings paper can be addressed to: Mr Johan Lamprecht, Director: Economic Tax Analysis, Private Bag X115, Pretoria, 0001; or by fax to 012 315 5516; or by email to email@example.com
- Submissions on the Improving tax incentives for retirement savings paper can be addressed to: Ms Beatrie Gouws, Director: Legal Tax Design, Private Bag X115, Pretoria, 0001; or by fax to 012 315 5516; or by email to firstname.lastname@example.org