Question:
Is it true that a retirement annuity can reduce my monthly tax contribution? I am currently being taxed R1 600 per month, then I joined an Old Mutual Retirement Annuity last month, but I have not yet seen a difference in my monthly tax contribution.
Answer:
Selapela,
Yes, it's true, provided you earn non-pensionable income. Pensionable income is the income used by your employer to calculate contributions to the company's retirement fund. Some income may be excluded from pensionable income such as bonuses and overtime. It also includes any interest income above R23 400 and any net rental income. If your company does not have a retirement fund, all your income will be non-pensionable.
So you can claim contributions to a retirement annuity up to 15% of any non-pensionable income. To claim the tax you need to indicate the contributions on your tax return. SARS will probably ask for proof, so you need to request a tax certificate from the retirement annuity administrator.
