TAX ON RE­TIRE­MENT AN­NU­ITIES

CityPress - - Business -

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.”

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