Share

Tax deductions and tax reforms

A Fin24 user wants to know if Sars has changed the tax deductions on pension funds because of the new retirement reforms coming into effect. He writes:

With the new retirement reforms coming into effect on the March 1 2015 I have a question regarding the new tax implications on my contributions to a retirement fund for the 2015 financial year.

I am currently working for a large international employer who has its own managed umbrella provident fund to which I contribute to monthly.

I earn R500 000 a year and my fund salary is calculated at 50% of my annual salary. I contribute 16.5 % of this fund to my provident fund annually.

Currently the deductions on a pension fund contribution are the greater of 7.5% of remuneration from retirement funding employment, or R1 750.

I am not allowed any deductions when it comes to filing my tax return at the end of the year due to the fund being a provident fund and not a pension or retirement annuity fund.

As of March 1 2015 my funds are being moved to Sentinel Retirement Fund - I understand it as being a pension fund - as I am aged 29.

Will I be able to claim any deductions on my monthly contributions on my tax return for the 2015 tax year or any future years or has the SA Revenue Service changed the tax deductions on pension funds because of the new retirement reforms coming into effect?

Anton Swanepoel, manager of Sanlam Employee Benefits and chairperson of the legal and technical committee of the Institute of Retirement Funds Africa, responds:

From March 1 2015 employer contributions to retirement funds will be taxed as fringe benefits in the hands of employees.

For tax purposes these employer contributions will be deemed to have been made by the employees.

Employees may deduct up to 27.5% of remuneration or taxable income in respect of contributions - employer/employee, including employee contributions to a provident fund - to pension, provident and retirement annuity funds, subject to an annual cap of R350 000.

Therefore, the tax deductions for member contributions to provident funds will apply with effect from the 2016 tax year, that is the tax year from March 1 2015 until end of February 2016.

In other words these deductions will not apply for the 2015 tax year.

* Fin24 also contacted Sentinel to provide an answer, but received not response.

- Fin24

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.90
+0.2%
Rand - Pound
23.84
+0.3%
Rand - Euro
20.39
+0.2%
Rand - Aus dollar
12.31
+0.3%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders