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South Africa Consults Further On Retirement Tax Benefits

by Lorys Charalambous,, Cyprus

02 November 2015

The South African National Treasury has released, for urgent consultation, amendments to provisions of the 2015 Taxation Laws Amendment Bill (2015 TLAB) that are intended to ensure the consistent tax treatment of all retirement funds, whether they are provident, pension, or retirement annuity funds.

The government has confirmed that it will be proceeding, on March 1, 2016, with the tax reform enacted in 2013 and 2014 to extend the tax deduction benefit on contributions to provident fund members, and to limit the deduction to the lesser of 27.5 percent of taxable income or ZAR350,000 (USD25,440). Contributions by employers to provident, pension, and retirement annuity funds on behalf of employees will become a taxable fringe benefit.

It is also still intended that all provident fund members now under the age of 55 who retire will be required to purchase an annuity (those over that age will not). The further consultation on the 2015 TLAB is therefore limited to whether, and for how long, the annuitization of provident funds should be delayed, and whether there should be a transitional period.

It remains the intention of Government that "the tax deduction of retirement fund contributions must be related to annuitization, to reduce vulnerability in retirement by ensuring a secure monthly income for members in retirement."

The National Treasury stressed that, "if [provident fund] members want to enjoy tax deductions for retirement contributions, then they should be expected to commit to annuitization (two-thirds) with a one-third lump sum, the same benefits offered by pension funds and retirement annuity funds."

TAGS: individuals | South Africa | tax | investment | pensions | fringe benefits | employees | retirement | investment funds | ministry of finance | tax breaks | tax reform | individual income tax | Africa | Tax

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