WORTH THE WAIT?

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW -

bro­ken into the pen­sion changes — called P-Day — and the tax changes, called T-Day.

The rec­om­men­da­tions for the stillto-be-set T-Day will af­fect the tax­a­tion of your re­tire­ment fund con­tri­bu­tions. The rec­om­men­da­tions change those made last year by for­mer fi­nance min­is­ter Pravin Gord­han, which were sched­uled for im­ple­men­ta­tion on March 1 2014. The latest rec­om­men­da­tions are:

Your em­ployer’s con­tri­bu­tions will be added to your tax­able in­come as a fringe ben­e­fit;

You will be able to deduct both your and your em­ployer’s con­tri­bu­tions to a pen­sion fund, prov­i­dent fund or re­tire­ment an­nu­ity (RA) fund up to 27.5% of the greater of re­mu­ner­a­tion or tax­able in­come;

There will be a rand cap of R350,000 on the to­tal amount you may deduct from your tax­able earn­ings in any tax year;

Con­tri­bu­tions in ex­cess of the an­nual cap may be rolled over to fu­ture years when you may not reach the cap amount;

Any non-de­ductible con­tri­bu­tions will be added to your tax-free lump sum at re­tire­ment; and

From T-Day, any new con­tri­bu­tions made to a prov­i­dent fund will be sub­ject to the same an­nuiti­sa­tion rules as pen­sion funds, namely that at least two-thirds of the sav­ings must be used to pur­chase a pen­sion at re­tire­ment. Any prov­i­dent fund sav­ings made be­fore T-Day, and any in­vest­ment growth on those sav­ings, will not be sub­ject to the new pen­sion pur­chase re­quire­ment.

The gov­ern­ment is propos­ing tighter con­trols on pre­serv­ing re­tire­ment sav­ings, but it will al­low you to ac­cess sav­ings be­fore re­tire­ment dur­ing pe­ri­ods of un­em­ploy­ment.

How­ever, vested rights will be pro­tected to avoid a re­peat per­for­mance

Pic­ture: THINK­STOCK

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