We’ve been getting a ton of email as SARS has made changes to tax-free contribution limits as below;
“Exemption of amounts received or accrued in respect of tax-free investments
Section 12T(4)(a) of the Income Tax Act was amended as follows: Where any person’s year of assessment is less than 12 months, the contribution limitation stipulated in section 12T(4)(a) of the Act (currently R36 000), shall be adjusted. The adjusted contribution limitation will apply in aggregate for any year or years of assessment during the 12-month period commencing in March and ending at the end of February of the immediately following calendar year.
Therefore, if any person’s year of assessment is less than 12 months, the applicable contribution limitation (currently R36 000) will be applied pro rata.”
This only matters to you if your current tax year of assessment is less than a full year. If your assessment is for the full twelves months running March – February of each tax year, then nothing changes.
If your assessment was for less then twelve months the annual limit of R36,000 is pro-rata for how many months you were a registered tax payer. This would really only impact somebody leaving the SARS process (emigrating) or entering SARS process via immigration.
The other issue is birth and death. A child born say end of August could only contribute half the years R36k and equally somebody dying end of August could only contribute half the annual amount. The latter is tricky if already contributed the full amount, no idea how that would be resolved. But both are edge cases.
Important not paying tax because you received no income does not reduce the assessment period.
Simon Brown
ETF blog
At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.
