Your pension is going to be taxed differently as from the year 2012.
Money contributions towards either your pension fund or retirement
annuity from your place of employment is not taxed at present, but this
is about to change.
When the budget speech was made this year in March, all pension funds as well as retirement annuity
contributions made by your company will change from next year as SARS
considers this expense to be fringe benefits and therefore will be
subjected to being taxed.
This all depends, naturally, on what type of annuity you currently
are on. The amount you are presently permitted to deduct, should you
belong to a pension fund, is a maximum amount of 7, 5 percent of your
pensionable salary.
There is also tax relief for your employer’s portion if your company contributes towards your pension.
If you belong to a provident fund you are not taxed but your employer will be.
The new tax plan is much easier to follow and to understand.
Although you company will be taxed as “fringe benefits” , you will
now be the master of your own destiny as you will be in a position to
deduct your own contribution from your taxable income of up to 22,5
percent of your annual income.
There are always exceptions to rule, though; if both you and your company contribute more than 22, 5 percent of your annual taxable income
towards your pension or retirement annuity, you will no longer be able
to withdraw the whole amount, and should you earn more than R880 00 per
annum the limit will not be 22, 5 percent, but will be a lower amount.
You will also not be allowed to withdraw more than R200 000 a year.
The new taxes can have a negative effect on your cash flow, but if
employees tax employers on a monthly basis, this will not have such a
negative impact on the individual contributor.
Plan wisely and start contributing towards your pension when you are
young as most South African’s do not provide adequately for their
retirement years.
