Statement on Implementation of Tax Harmonisation of Retirement Fund Contributions and Benefits
07 December 2015
Posted by: Author: National Treasury
Author: National Treasury
National Treasury has released a media statement that the tax harmonisation reforms for retirement funds will be implemented from 1 March 2016. This is in terms of the Taxation Laws Amendment Act‚ No 39 of 2013‚ as amended by Act No 43 of 2014).
According to the statement the 2015 Taxation Laws Amendment Bill did not amend the scheduled implementation date‚ but only amends the R150‚000 de minimis threshold to R247‚500; closes certain coverage gaps; requires a review of the legislation after two years from the effective date and to report this review to Parliament.
In terms of the tax harmonisation reforms of retirement funds, all individual taxpayers who contribute towards a retirement fund (pension or provident fund or retirement annuity) after 1 March 2016‚ will qualify for a tax deduction up to 27.5% of the greater of taxable income or remuneration‚ up to a limit of R350‚000. The law also allows one-third of the retirement saving to be cashed out as a lump sum‚ with the remaining two-thirds to be annuitised.
This law already applies to all pension fund and retirement annuity fund members‚ but will now be extended to members of provident funds. Therefore‚ all new contributions into provident funds after 1 March 2016 by those younger than 55 years will be subject to the two-thirds annuitisation requirement‚ but only once the amount at retirement exceeds the de minimis threshold. It will take several years before many provident fund members under the age of 55 years reach this higher limit.
Both Houses of Parliament had now passed the 2015 Taxation Laws Amendment Bill‚ which now only awaited the assent of the President.
Please click to view media statement and Questions & Answers (Q&A): Tax harmonisation and retirement reforms.