Question:
can you give me realistic example of a people benefiting from recurring premium, single premium and an ad hoc premium in terms of their taxable income?
Answer:
Madileng, Retirement annuity contributions are tax deductible up to a maximum of 15% of non-pensionable taxable income. If you contribute more, you may claim excess amounts in future tax years. You may also add your excess contributions to the tax-free portion of any lump sum you receive. So if you earn R10 000 pm and you contribute R1 500 to a retirement annuity every month, then you will only pay income tax on R8 500. If you only contribute R1 000 every month, you can then make an additional contribution in February of R6 000, to maximise your tax deduction that year (R18 000). Normally, you only get the tax benefit when you are assessed. You will indicate on your return that you contributed R18 000 during the year to a retirement annuity (with a tax certificate to prove it), and SARS will give you a refund in respect of the contribution (R18 000 x your marginal tax rate).
