By Jameel Dalvi (Group Director)
Contributing to a Retirement Annuity (‘RA’) has always been a popular method of providing for retirement, while enjoying a tax deduction on your Personal Taxes. Up until 29 February 2016, the tax deduction for RA Contributions is limited to 15% of Taxable Income – however, with effect from 01 March 2016, the RA Contribution Tax Deduction limitation has been increased to 27.5% of Taxable Income, which represents quite a large increase (83.3%).
A simple example of the impact of the above change is as follows (note that this is simplified, and for illustration purposes only):
For an individual who earns R250,000 per annum, the RA tax deduction is limited to R37,500 per annum, or R3,125 per month
With effect from 01 March 2016 however, the RA tax deduction is limited to R68,750 per annum, or R5,729 per month (representing a 83.33% increase in the allowance).
The additional tax saving in the example above amounts to R8,073 per annum, or R672 per month (at 2016 rates).
If you require more guidance on the impact of the above on your personal tax, or you require more guidance on your particular Retirement Annuity options, please do not hesitate to revert on this post. We are always ready to assist. Please don’t forget to share this valuable information.