In two new papers South Africa has given further detail on the tax free savings products and reforms to retirement pensions that were announced in the 2014 budget. In respect of retirement reform the government intends to implement a system of mandatory contributions and to improve disclosure by funds. The retirement savings products will be made simpler and they will be easier to transfer from one provider to another. Draft legislation issued by the government will undergo a process of formal consultation.
From 1 March 2015 employer contributions to pension funds on behalf of employees are to be taxable as an employment benefit on the employee. A deduction will be available to the employee in respect of employer and employee contributions to the pension or retirement fund up to 27.5% of the greater of remuneration or taxable income. There will be an annual maximum of ZAR 350,000 to this deduction. From 1 March 2014 there has been an increase in the tax free lump sum payable from funds.
Legislation is to be brought forward this year to provide for tax free savings accounts, to encourage savings by households. The interest or other returns from the accounts will be tax exempt and there will be no taxation in respect of any withdrawals from the accounts. The tax free savings accounts will be implemented by 2015.
