Question:
Hi 10x team, Can I please ask what the tax implications would be for moving cash savings into my new Retirement Annuity? I have started saving for my retirement quite late but I would like to make up for my previous lack of contributions with a cash injection. Thanks, Jason
Answer:
Jason, You may deduct contributions up to 27,5% of your gross remuneration or taxable income (whichever is the higher) in respect of your total contributions to a pension, provident or retirement annuity fund, subject to an annual limit of R350 000. Any contributions not claimed for tax this year can be claimed in subsequent years, subject to the prevailing limit in those years. As you most likely know, you will not be taxed on the return earned in your retirement annuity, only on the withdrawal. Any lump sum you take at retirement is taxed per the retirement lump sum tax table, as follows: the first R500 000 is not taxed, the balance to R700 000 is taxed at 18%, the balance to R1 050 000 at 27% and any amounts above that at 36%. Annuity payments are taxed as income, according to the personal income tax tables. Any contributions not claimed for tax by withdrawal date are not taxed on pay-out, be it as part of the lump sum or as annuity payments.
