QUESTIONS AND ANSWERS ON TAX HARMONISATION AND RETIREMENT REFORMS
Click on the link below to read the National Treasury questions and answers document on the harmonisation and retirement reform due to come into effect 1 March 2016.
Questions and Answers (Q&A)1 3rd December 2015 Tax harmonisation and retirement reforms:
- What are the changes that will come into effect on 1 March 2016? The Taxation Laws Amendment Act, 2013 will come into effect on 1 March 2016. This law allows for a 27.5% tax deduction up to a maximum of R350 000 per annum for all retirement fund contributions. This law should have been implemented on 1 March 2015, but was delayed by one year to take account of concerns raised by some stakeholders. Further, the new law passed in Parliament has increased the amount required for annuitisation at retirement from R150 000 to R247 500, closes certain coverage gaps; and requires a review of the legislation after two years from the effective date, and to report this review to Parliament .
- What is an annuity? An annuity is income earned in retirement from the retirement savings one would have accumulated over ones working life.
- How much of one’s retirement benefits needs to be annuitised after 1 March 2016? For pension funds and retirement annuity funds, there will be no change. For provident funds, one third of the retirement benefit lump sum may be taken as cash and the remaining two thirds has to be annuitised with respect to contributions made after 1 March 2016 for those below 55 years of age. For example, with a retirement benefit of R300 000, the amont that may be taken as a lump sum is R100 000 and R200 000 would have to be annuitised, meaning the member would get a monthly income from this.