How the Taxation Laws Amendment Act impacts you

by Capisol on January 21, 2016 No comments

How the Taxation Laws Amendment Act impacts you

In our previous blog post, we advised that the 2015 Taxation Laws Amendment Bill had been passed by Parliament and only required the signature of the President.

The Bill has now been signed, effectively making T-Day law with effect from 1 March 2016.

In summary, the tax changes effective from 1 March 2016 (T-Day), are:

Employer contributions to retirement funds will be taxed as a fringe benefit, but these contributions will be deemed to be employee contributions for the purposes of claiming the deduction.
All approved funds (Pension, Provident and Retirement Annuity Funds) will be subject to a contribution deduction of 27.5% of the greater of taxable income or remuneration.
A yearly maximum contribution of R350 000 across all retirement vehicles will apply. Contributions exceeding this maximum may be carried forward to following tax years.
The rights of Provident Fund members to take retirement benefits in cash will be protected for all benefits that they have accumulated to T-Day, plus the growth thereon until their retirement.
Provident Fund members under 55 years: All contributions from 1 March 2016 will be subject to 1/3 cash and 2/3 pension at retirement; however, if this benefit is less than R247 500, the member may take the entire benefit in cash.
Provident Fund members who are 55 years or older as at 1 March 2016 will still be allowed to take their retirement benefit in cash, irrespective of the amount, if retiring from the same fund.
Provident Fund members are likely to see an increase in their take-home pay, as their contributions will now be tax deductible.
For a Provident Fund member, any pre T-Day savings plus growth thereon may be taken in cash.
All members will still be able to take their benefit in cash when they leave their employment prior to retirement.
What should employers do?

Ensure that their HR and payroll systems are adapted to meet the new SARS requirements as a result of the changes.
Take careful consideration of the impacts of transfers for fund members over 55 years.
Make certain that member communications focus on:
Ensuring that your employees are aware of, and understand, the upcoming changes.
Explaining the benefits of additional voluntary contributions and providing instructions on how to make these.
Reinforcing the message that your employees do not need to resign to protect their retirement savings or their rights as a fund member.
The tax changes have created uncertainty among members of retirement funds. This uncertainty is mainly owing to rumour and misunderstanding.

The tax changes are largely a positive step for the retirement fund industry as it encourages saving through greater tax relief, thereby creating the conditions for members to be financially secure at retirement.

Source

CapisolHow the Taxation Laws Amendment Act impacts you

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