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I need clarity on what is viewed as non-retirement income for purposes of the 27,5% calculation.

Posted 29 February 2016 under Tax Questions



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SAM says:
27 February 2016 at 14:34

As pensioner, my annual pension amounts to R784 672, in addition I receive taxable interest of R18 000 and tax free interest of R115 200 as well as a consultation fee income of R100 000. I want to invest the maximum of 27,5% in a retirement annuity. How much can I annually invest in a retirement annuity?

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TaxTimTaxTim says:
28 February 2016 at 17:50

Why is your interest of R115 200 tax free?


SAM says:
28 February 2016 at 19:20

This is the tax free income of a Momentum 5 year income plan: Guaranteed Endowment policy - an insurance product. I am unsure how I must delare this income to SARS ( Momentum will provide me with an IRP5) and whether this income will be included by SARS for purposes of the calculation of the allowable 27,5% tax friendly investment in retirement annuities?


TaxTimTaxTim says:
28 February 2016 at 20:26

No this will not be included in your taxable income for the purposes of this calculation. You would add up all your other amounts, excluding all the interest and apply the 27.5% to that for the purposes of the calculation which is capped at R350 000.


SAM says:
29 February 2016 at 7:11

I assume all taxable interest above R23 800 must be included for the 27,5% calculation?


TaxTimTaxTim says:
29 February 2016 at 8:30

That is correct yes.


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