National Treasury introduces proposals to encourage saving for retirement

The Draft Taxation Laws Amendment Bill for 2013 was published by National Treasury recently and public comment is welcome until 05 August 2013.

The purpose of this publication is to receive comments on proposed legislation discussed during the 2013 budget presentation. Once the draft amendments are accepted, these proposals will become law on the effective dates proposed.

One of the biggest changes included in this draft publication includes the retirement fund reform proposals compiled by National Treasury. The purpose of this reform is to encourage individuals to save more towards retirement income by offering greater tax incentives. If these proposals are accepted, we could see the following changes being implemented on 01 March 2015:

  • Employer contributions towards a pension, provident or retirement annuity fund will result in a fully taxable fringe benefit. Currently, this rule only applies to retirement annuity fund contributions.
  • At the moment, individuals qualify for tax deductions of retirement fund contributions based on certain statutory limits for pension contributions and retirement annuity contributions. The proposed change will result in a higher deduction limit that will be applied to all contributions, whether towards a pension, provident or retirement annuity fund.
  • Provident funds will now also be required to limit lump sum payments to 1/3 of the total fund value and distribute the remainder of the fund value as annuity payments.

 

Another proposal that we could see implemented on 01 March 2014 will result in the contributions towards an income replacement policy being fully taxable with no tax deduction allowed from the effective date. At the same time, policy pay-outs will be tax free even if the policy holder claimed contribution deductions prior to 01 March 2014.

 

To access the draft proposals and explanatory memorandums, visit the National Treasury website (http://www.treasury.gov.za/legislation/draft_bills/default.aspx)

 

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Filed under General, HR, Industry Information, Legislative Updates

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