The Taxation Laws Amendment Act No. 31 of 2013 was published in Government Gazette No. 37158 on 12 December 2013. A reader sent me a copy of Momentum’s Legal Update No. 3 of 2014 which was published on 17January 2014. We will obtain permission to publish the contents with readers over the next few weeks, seeing that February is traditionally Retirement Annuity Season.
In brief, the amendments change the tax treatment of contributions to retirement funding, and aligns the annuitisation requirements between pension, provident and retirement annuity funds.
From 1 March 2015, employer contributions will be taxed in the hands of the member and the member will get a tax deduction on the total contribution towards retirement funds, subject to an annual percentage and monetary limits.
As an incentive to clients to provide for their own retirement, a substantial increase in the total percentage allowed for tax relief was announced. This is also good news for advisors who were hamstrung by the old 15% rule.
I could not help but copy this introduction by the inimitable Matthew Lester in his introduction to an article, written before the publishing of the Amendment Act, and published in Glacier by Sanlam’s The Inside Story newsletter:
It has always been easy to set examinations designed to fail Tax 101 students – just test the tax deductions on employer and employee contributions to pension, provident and retirement annuity funds. Each type of retirement fund has its own tax deduction rules. All it takes is a taxpayer invested in multiple retirement funds and the chaos is complete.
Please note that the implementation date mentioned in this article is not correct. It was based on the information contained in the Bill at the time of writing.
The simplification contained in the new regulations is a major step forward in the drive towards clearer taxation laws.