Tax on a lump sum invested | Fin24
 
  • New Notes

    Long queues have formed in Harare after Zimbabwe released new bank notes and coins.

  • Open Book

    Former President Jacob Zuma says the public protector can access his tax records.

  • Electricity

    Sowetans should pay rate of R150/month to foster a payment culture, says an ANC councillor.

Loading...

Tax on a lump sum invested

Jul 28 2013 18:23
A Fin24 user has a lump sum to invest, but wants to do so in a tax efficient way. He writes:

I have R700 000 I want to invest in a retirement annuity (RA) as a lump sum.

What is the most tax efficient way to do this?

I earn about R500 000 per annum and contribute about R68 000 per annum to a retirement fund.

Marc Sevitz  of TaxTim responds:

On earnings of R500 000 per annum the maximum allowed as a deduction for retirement annuity fund (RAF) contributions is 15% or R75 000 per year.

With R68 000 already being contributed per year, that only leaves R7 000 of the R700 000 to be allowed as a deduction, of which R1 800 will be carried over each year.

So there is limited opportunity for tax saving on a large RA investment.

However, once the RA pays out to the taxpayer, the amounts not allowed as a deduction, will be used to reduce the overall payout and therefore reduce the tax paid on the final lump sum.

- Fin24

Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

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.

taxtim  |  retirement annuity  |  tax  |  retirement  |  money clinic
NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
1 comment
Comments have been closed for this article.
 

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

What do you think about private healthcare in SA?

Previous results · Suggest a vote

Loading...