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Retirement Funding Changes - Effective March 2016


SARS has changed (in the making since 2012) certain aspects of CONTRIBUTIONS and PAYOUTS of RETIREMENT FUNDING SCHEMES. This applies to PENSION, PROVIDENT and RETIREMENT ANNUITY FUNDS, the objective being to treat all of these the same. (This is in contrast to before, when there were differences that not only created confusion, but also seemed rather meaningless.)


PROVIDENT FUNDS will now become more aligned with PENSION FUNDS and RETIREMENT ANNUITY FUNDS in that .........

- Whereas each type of fund previously had different limits of contributions that was 'deductable from Taxable Income', there will now be a general limit for all persons on Retirement Fund contributions, amounting to 27.5% of Taxable Income or R350,000 per year, whichever is the smaller.
NOTE: all contributions by Employers to these funds (on behalf of their employees), have been and will continue to be a 'Deductable Expense from their Taxable Income

- Payouts on retirement can only be taken 1/3 as a Lump Sum, the remaining 2/3 must be used to buy an Annuity (previously all of the Payout from a PROVIDENT FUND could be taken as a Lump Sum)


- Benefits derived by Employees from Employer contributions must be added to the Employee's Taxable Income as a Fringe Benefit.
- All Employer and Employee contributions (Employee Deemed Contribution) will however be 'deductable from the Employee's Taxable Income'
* The nett result in effect will be that the Employee's Contribution will be 'deductable from his/her Taxable Income'

-Ensure that your Organisation is making a contrubution to a legitimate RETIREMENT FUNDING SCHEME
-Establish on what basis the Organisation's and the Employee's contribution will be calculated, ie. Fixed amount for all employees, % of remuneration (specifically Retirement Funding Income).

-Effective Mar'2017, two fields will be needed to cater for the requirements of SARS, nl.
+the Org contribution, Fringe Benefit. Field No.28
+the Empl contribution, Deduction. Field No.29

Field settings in Remunerator
Parameter Field 28 Field 29 Comment
Description Org. Contribution Empl. Contribution
Tax Code 3817, 3825, 3828 xxxx, yyyy, zzzz Either Pension, Provident or RA Fund
IND Flag N D Income, Deduction, NonPay flag
GI 1 0 Adds to Gross Income SubTotal
TI 0 -1 Adds to Taxable Income SubTotal

'Org Calc Fact', and 'Calc Source' will depend on method of calculating the amounts

Pierre Myburgh