Tax change to em­ployer RA con­tri­bu­tions

Weekend Argus (Saturday Edition) - - PERSONAL FINANCE -

It is likely that from March next year con­tri­bu­tions your em­ployer pays to a re­tire­ment an­nu­ity (RA) fund on your be­half will be tax-de­ductible.

The draft Tax Laws Amend­ment Bill pro­poses amend­ing the In­come Tax Act to make it pos­si­ble for you to claim a tax de­duc­tion for con­tri­bu­tions your em­ployer pays to an RA fund on your be­half. The pro­vi­sion at­tracted few com­ments and no pro­posed amend­ments dur­ing pub­lic con­sul­ta­tions on the Bill.

If the pro­vi­sion is en­acted as pro­posed, it will make it im­ma­te­rial from a tax point of view whether your em­ployer pays an amount into an RA on your be­half or in­creases your salary by the same amount and you make the con­tri­bu­tions your­self.

The South African Rev­enue Ser­vice al­lows you to claim against your tax­able in­come for con­tri­bu­tions made to an RA fund up to cer­tain lim­its. Cur­rently, how­ever, if your em­ployer pays con­tri­bu­tions to an RA fund on your be­half, you can­not claim a tax de­duc­tion.

And you be­come li­able for fringe ben­e­fits tax on that ben­e­fit, be­cause it is re­garded as a re­pay­ment of debt by your em­ployer on your be­half.

The pro­posed amend­ment will also al­low your em­ployer to take into ac­count the con­tri­bu­tions to an RA paid on your be­half when cal­cu­lat­ing how much tax to deduct from your salary each month. This means you won’t have to wait un­til your tax re­turn is as­sessed to re­ceive the ben­e­fit of this de­duc­tion.

The Tax Laws Amend­ment Bill pro­poses that the amend­ment be made ef­fec­tive from March next year. – Laura du Preez

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