There are three tax benefits:
- Contributions are tax deductible: Contributions (in aggregate, across all types of retirement funds) can be claimed for tax up to a maximum of 27.5% of gross remuneration or taxable income (whichever is the larger), subject to an annual cap of R350,000. Employees may claim excess contribution in subsequent years, subject to the annual limit. Unclaimed contributions are added to the tax-free portion of any lump sum at retirement.
- Investment returns are not taxed: there is no income tax or capital gains tax on the investment return earned in a RA.
- Benefits are taxed on a favourable basis: lump sum benefits are taxed on a sliding scale with a portion of the benefit paid out tax free (see details under “How are retirement annuity benefits taxed?”).
The information and answers supplied in this section do not constitute advice as defined by the Financial Advisory and Intermediary Services Act, 37 of 2002.
