TAX ON RETIREMENT ANNUITIES
Aretirement annuity is an investment product that you use to save towards retirement and is similar to a pension or provident fund. The underlying investments in retirement annuities are usually unit trust funds.
“Retirement annuity contributions qualify for tax deductions, so remember to take advantage of this attractive tax benefit when you submit your return,” says Annemie Nieman, legal technical adviser at PSG.
If you earn an income from only one employer and earned less than R350 000 for the period from March 1 2014 to 28 February 2015, you do not have to submit a tax return. You should also:
Not have conducted any trade for the financial year.
Not have received any travel or accommodation allowances.
Not have had a capital gain or loss of more than R30 000.
Not have received interest of more than R23 800 (for taxpayers below 65) or R34 500 (for taxpayers 65 and over) from a South African source.
Not have any assets abroad. “If you fall into this category, you are correct in thinking you do not have to submit a return. However, by not submitting, you give up the opportunity to claim back some of the tax you have already paid to the SA Revenue Service (Sars),” says Nieman.
In many cases, taxpayers are unaware of the qualifying deductions they can claim back.
For example, your contributions to a retirement annuity qualify for a tax deduction, but only if you submit a return.
“The tax deduction can be quite substantial,” Nieman adds. For example, a 35-year-old taxpayer earning a salary of R340 000 a year would pay tax of R63 384 for the 2015 tax year if no deductions are claimed.
“If, however, the taxpayer submits a tax return and claims a deduction for retirement annuity fund contributions of R30 000, the tax payable would reduce to R54 084. That is a reduction in tax and a reimbursement from Sars of R9 300 for the year.”