Tax change to employer RA contributions
It is likely that from March next year contributions your employer pays to a retirement annuity (RA) fund on your behalf will be tax-deductible.
The draft Tax Laws Amendment Bill proposes amending the Income Tax Act to make it possible for you to claim a tax deduction for contributions your employer pays to an RA fund on your behalf. The provision attracted few comments and no proposed amendments during public consultations on the Bill.
If the provision is enacted as proposed, it will make it immaterial from a tax point of view whether your employer pays an amount into an RA on your behalf or increases your salary by the same amount and you make the contributions yourself.
SARS allows you to claim against your taxable income for contributions made to an RA fund up to certain limits. Currently, however, if your employer pays contributions to an RA fund on your behalf, you cannot claim a tax deduction.
And you become liable for fringe benefits tax on that benefit, because it is regarded as a repayment of debt by your employer on your behalf.
The proposed amendment will also allow your employer to take into account the contributions to an RA paid on your behalf when calculating how much tax to deduct from your salary each month. This means you wont have to wait until your tax return is assessed to receive the benefit of this deduction.
The Tax Laws Amendment Bill proposes that the amendment be made effective from March next year.
– TAXtalk: www.taxtalk.co.za.
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