On 16 October 2014, National Treasury published various documents and revised taxation bills affecting the social security reform and employee benefits industry. Essentially, the retirement fund lump sum and tax changes earmarked for 1 March 2015 have been postponed by Treasury. The changes will likely be postponed to 2017 in order to allow Treasury to engage with the Unions.
http://www.bdlive.co.za/business/financial/2014/10/16/unions-hail-delay-in-pension-tax-reform
What is changing?
Without going into detail, the following are of immediate interest.
1. Retirement fund contributions
The effective date for the changes to the way in which retirement fund contributions would be taxed has been delayed for a year.
2. Valuation of defined benefit fund contributions
The valuation of defined benefit fund contributions will only be applicable when the changes to retirement fund contributions come into effect. These changes have accordingly also been delayed by a year.
3. Provident fund post-retirement alignment
The effective date for the changes to the taxation of provident fund benefits to be in line with pension funds and retirement annuity funds has also been delayed for a year.
According to the media statement, the implementation of these changes will be delayed for a year to allow for further consultations between Government and NEDLAC on social security reform. Should there
be no agreement at NEDLAC by 30 June 2015, the implementation date may be moved out for another year, to 1 March 2017.
What stays the same?
1. Disability income benefits
The effective date for the changes relating to the taxation of employer-provided disability income benefits, is still 1 March 2015. From 1 March 2015, a member will no longer be able to claim a tax deduction on the premium paid for a disability income benefit and the benefit will be paid out tax-free.
2. Tax free savings
The effective date for the provisions on tax free investments, to an annual maximum of R30 000 and a lifetime maximum of R500 000 remains at 1 March 2015.
What is new?
1. Right to elect when to retire
The amendment to the definition of “retirement date” which aims to allow the member to elect when he wants to retire will come into effect on 1 March 2015.
All related documents: the National Treasury published a media statement, the revised draft Taxation Laws Amendment Bill 2014 (TLAB), the revised draft Tax Administration Laws Amendment Bill 2014 (TALAB) and
the draft Response Document that was presented to the Standing Committee on Finance (SCOF) in Parliament on 15 October 2014 are available on the National Treasury website http://www.treasury.gov.za/legislation/bills/2014/TLAB-TALAB/.