What is tax rebate on a retirement annuity?

Unlike your medical aid contributions, your RA contributions qualify for a tax deduction or a tax refund rather than a tax rebate.

Although you are free to contribute as much as you want to your RA, the retirement annuity tax relief for the 2017 tax year is set a maximum rate of 27,5% of income, subject to a rand cap of R350,000. This R350,000 rand cap (and the 27,5% limit) however includes the contributions made to a workplace pension or provident fund. If you contribute over the limit: SARS keeps a record of all unclaimed contributions, and allow these in future years (subject to the prevailing limits in those years).  

To calculate your retirement annuity tax relief, you must multiply the amount of your contribution by your marginal tax rate (the highest tax rate applied to any part of your income). So if you contribute, say R12,000 per year, and your marginal tax rate is 25%, then you would get a refund of R3,000. If your marginal tax rate was 41%, your refund would be R4,920.  

The information and answers supplied in this section do not constitute advice as defined by the Financial Advisory and Intermediary Services Act, 37 of 2002.

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