Want to receive MORE tax back from the taxman and look after your retirement at the same time?
Were you aware that the Government this year made a fundamental change in the taxation on Retirement funding, and YOU, as the taxpayer, can now get a significant amount more back from the taxman, than previously?
If you didn’t know this, and want to get more tax back, then a retirement Annuity may be the answer for you!
What is an RA, how does it work, and how do I get money back?
Before, we go further; let me remind you what a retirement Annuity is. A retirement annuity (RA) is essentially a private pension plan – an investment that is specifically designed to help you save for retirement.
When you turn 55 (or an age thereafter, if you prefer) it pays out a lump sum (of which a good portion is tax free and the rest is taxed at a very favourable rate)
In essence, government “pays” you a considerable amount of money to incentivise you to save for your own retirement
How exactly do they “pay” you?
Firstly, you can now deduct contributions (up to 27.5 percent of your gross income, was previously 15%) to your RA from your taxable earnings. (Up to a maximum deduction of R350, 000 per year)
Joe earned R240 000 per year and contributed R36 000 (15 percent of R240 000) to his RA last year. He would’ve got taxed as if he had earned R204 000 per year.
Joe would have had to pay R35053 in tax (2015 tax tables) if he didn’t pay into an RA. However, because he contributed to an RA, he would have only been liable to pay R26053 and would’ve received a nice, fat rebate of R9000. In essence, the government would’ve paid him R9000 to invest R36 000 towards her own retirement!
Now, with the new legislation changes as of 1 March 2016, If Joe earned R240 000 and he made no contributions this year, he would pay R35053 in tax. If Joe uses the full allowance and contributes 27.5% (R66 000), he would now pay tax of only R17818 (a massive saving in tax of R16039 for the year!
In addition, with any other investment’s you have to pay capital gains tax; not so with your RA.