Question:
Hi I would just like clarity on how my non-deductible retirement fund contributions will be treated at retirement? I believe it will be added to my tax free portion but who is responsible for a keeping record of this? SARS? Your assistance is appreciated
Answer:
Contributions in excess of the allowable deductions are referred to as ‘excess’ contributions. Excess contributions can be utilized in the following way:
1. Set off against taxable income: Excess contributions from previous tax years can be used as deductions against taxable income in future tax years. The limitations of 27.5% taxable income capped at R350 000 still apply.
2. Set off against the lump sum amount: The tax on the lump sum you can take from your retirement fund when you retire may be reduced by any excess contributions the SA Revenue Service (Sars) has on record for you.
3. Set off against Living Annuity Income: Excess contributions can be used as a setoff against Living Annuity income.
4. Set off against Death Benefit: The excess contributions can be used as set off against the lump sum received on the death benefit.
