How Efficient Are Contributions in Excess of R350 000?
18 April 2016
As a result of T-Day high income earners will no longer receive a tax deduction in respect of any contribution over R350 000. The balance will be taxed at the top marginal rate which currently is 41% and their cash flow will be reduced accordingly.
To date, high earners enjoyed total tax deductibility on their contributions to a retirement fund. From 1 March 2016, Government will only allow tax deductions up to a maximum contribution rate of 27,5% or Rand cap of R350 000 per annum.
The question is, how tax and cost efficient is a non-deductible retirement fund contribution and how will it compare with the alternatives available.