T-DAY RETIREMENT FUND REFORMS DELAYED Following a request from labour to allow for further consultations between Government and NEDLAC on social security reform, Government has agreed to delay the implementation of the new laws regarding the tax treatment of retirement fund contributions and the harmonisation of the annuitisation regime. For now, the delay will be for one year to 1 March 2016. However, should there be no agreement at Nedlac by end-June 2015, the implementation date may be moved to 1 March 2017. National Treasury has now released the Revised Draft Bill and Regulations and the final Bills are expected to be tabled in Parliament on Wednesday 22 October. The following changes have been delayed to 1 March 2016: • Fringe benefit taxation of employer contributions to retirement funds: o The value of employer paid contributions to retirement funds will be fringe benefit taxed in the hands of employee members. o Contributions paid by an employer to a retirement fund will be deemed to be an employee contribution to the extent of the fringe benefit inclusion, and as such, may be applied in respect of the new deduction regime that will be available to members. • The new deduction regime for retirement fund contributions: o This change will permit most members to increase their contributions and qualify for a deduction of up to 27.5% of their remuneration, subject to an annual maximum of R350 000. • Provident fund post-retirement alignment: o Members will only be able to take up to 1/3rd of their retirement benefits in cash, and be required to purchase a pension with the balance, as with a pension and a retirement annuity fund. Vested rights will, however, be preserved. The following changes are going ahead with effect from 1 March 2015 • Tax incentivised savings plan (TISP): o Investors will be entitled to invest in tax free investments up to an annual maximum of R30 000, with a lifetime maximum of R500 000. • New disability income tax regime: o Employees will now be taxed on the premiums paid by the employer which will result in a reduction in take home pay. If, however, they become entitled to receive a disability income benefit in the future, they will receive this tax free. • Option to postpone receipt of retirement benefits: o This change to the definition of “retirement date” will permit members to elect when they want to retire. They are currently only permitted to retire, with the associated tax benefits, upon reaching the normal retirement age.
Posted on: Wed, 22 Oct 2014 08:04:41 +0000
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