Question:
Hi, i need to know if you have to calculate tax that will be deducted by your employer,where do you put retirement annuity deductions?
Answer:
Fatima,
You can only claim retirement annuity deductions against non-pensionable income. Unless you belong to a group retirement annuity scheme, you will normally only claim retirement annuity contributions when you submit your annual tax return. Individuals may deduct up to 15% of their non-pensionable income as tax free contributions to an retirement annuity.
The distinction between pensionable and non-pensionable income can be confusing, but it is important you understand this. Taxable investment income is always non-pensionable. The confusing part relates to your remuneration from employment. Pensionable income is the income used by your employer to calculate your pension or provident fund contribution. This income will typically include any fixed remuneration (e.g. salary or wages) but may exclude variable amounts such as commissions, bonuses and overtime.
If you are a member of a pension or provident fund and all your remuneration (i.e.. your salary, commission, bonus and overtime) is pensionable, then none of your remuneration is non-pensionable. If you are a member of a pension or provident fund and all your basic salary is pensionable but your commission and bonus is not pensionable, then you may claim 15% of your commission and bonus as a tax free deduction to a retirement annuity. Non-pensionable income is your taxable income excluding (if any) your pensionable income, retirement fund lump sum benefits, assessed losses and capital gains.
If you are not a member of a pension or provident fund, all your remuneration is non-pensionable and you may claim 15% of your remuneration as a tax free deduction to a retirement annuity. The concept of non-pensionable income falls away from 1 March 2016. From that date you may deduct up to 27,5% of your gross remuneration or taxable income (whichever is the higher) in respect of your total contributions to a pension or retirement annuity fund, subject to an annual limit of R350 000.
