What are the proposed changes to the treatement of retirement fund contributions announced in the 2012 budget? The maximum deduction limit of R250 000 a year for taxpayers under 45 years may seem significant but is it beneficial to all taxpayers?
The changes are aimed at forcing people to actively save for their retirement and are supposed to come into affect on 1 March 2014, this date of course could always change. The changes are for those taxpayers below 45 years of age and above with different percentages and capping amounts being 22.5% and 27.5% respectively at R250 000 and R300 000 on the higher of taxable of actual employer based earnings. The point of this is to encourage savings for retirement beyond the already deductions which for lower income earners is quite small. 7.5% or 15% for Pension Funds and RAF's of an income of R100 000 is quite a small cap and does not reward the taxpayer enough so these changes seem to be good for all taxpayers. What is interesting and very good is that provident fund deductions will now be allowed which was not the case under the previous legislation. So over all I think a very good move by treasury.
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