RA Salary Deduction

[C_4]

Say my salary is R600k per year, with an annual bonus of R5k plus a gross rent income of R5k pm

1. Am I correct to say that the maximum annual RA deduction allowed is
(R600k + R5k + (12 x R5k)) * 27.5% = R182.88k ?

2. Even though I contribute to an RA fully myself, I have been given the option to add the monthly RA amount on my payslip (i.e. I will receive the tax benefit monthly instead of a lump sum). Since the bonus is variable, can I add
((R600k / 12) + R5k) * 27.5% = R15k or does it have to exclude the rent amount?

3. Any idea what the RA tax clearance number is and where to get it from?

I feel like getting the extra RA benefit monthly would allow me to better take advantage of compound interest if I invested the difference.

Thanks!

 

[^^vampire^^]

Not sure about the bonus being included in there unless it is written on paper that it is guaranteed; it's easier to leave bonuses out of it as they are generally paid once/twice a year and have a higher tax rate that complicates matters.

Basically your employer just pays you your NET + reimbursement for what would come from SARS. Whenever I did this my employer just listed it as allowable deductions or would just set my NET as the value of NET + reimbursement and then it was up to me to supply SARS the supporting paperwork come filing time. When I was on R60k gross it added about R5k extra a month when RA was 15%, now that it is 27.5% that would be a bit more so definitely worth it.

I like to use this tax calc to see how much I would save. Just note when putting in your RA amount it won't automatically cap the rebate at 27.5% so make sure you calc that and put it in in the RA field

 

[diapason]

Your employer will, most likely, give you the tax deduction only on what goes through their payroll system. Remember, they also have to ensure SARS compliancy. In this case you will have to wait for assessment to get tax relief on the contributions which relate to your rental income which is probably NET rental after property related deductions as the 27.5% relates to TAXABLE income. You would have to deal with bonuses as and when they happen but with unit trust based RAs you can pay in lump sums and then just provide your employer with proof from your RA company so that they can process the adjustment immediately.

You will get the relevant RA details from your RA company - you can probably log into the account yourself. Your employer will want a copy of something which indicates a monthly payment. You will need to provide this at the beginning of each tax year as evidence that you are still paying. The employer is required to have this.

 

[froot]

Your RA amount is based on your pensionable salary. Which in this case would be R600k * whatever factor your workplace uses as their pensionable salary, which could be anything from 50-100%.

Is your RA going through the payroll or is this a private contribution?

If it is going through the payroll as a deduction then it can only be based on that R600k.
If it is going through as a private contribution (you pay it, and you let the company know how much it is), then whatever.

 

[diapason]

Your RA amount is based on your pensionable salary. Which in this case would be R600k * whatever factor your workplace uses as their pensionable salary, which could be anything from 50-100%.

Is your RA going through the payroll or is this a private contribution?

If it is going through the payroll as a deduction then it can only be based on that R600k.
If it is going through as a private contribution (you pay it, and you let the company know how much it is), then whatever.

They no longer distinguish between pensionable and non-pensionable earnings. Since a couple of years ago deductions for retirement funding are based on TAXABLE earnings which could include rental income, investment income, bonuses, overtime, etc

 

[supersunbird]

They no longer distinguish between pensionable and non-pensionable earnings. Since a couple of years ago deductions for retirement funding are based on TAXABLE earnings which could include rental income, investment income, bonuses, overtime, etc

Since 1 March 2016 yes.

 

[C_4]

Thanks for the responses guys!

I'll definitely leave bonuses out of the monthly RA amount until they actually get paid. I can add those as a lump sum amount, so I'm fine with that. So I'll just ask to add the salary portion monthly.

I'll also adjust the final calculation to use net rental income instead of gross which I realize was wrong.

 

[froot]

They no longer distinguish between pensionable and non-pensionable earnings. Since a couple of years ago deductions for retirement funding are based on TAXABLE earnings which could include rental income, investment income, bonuses, overtime, etc

Since 1 March 2016 yes.

Yes. However, the majority of employers in my experience are still going the percentage route.

 

[supersunbird]

Yes. However, the majority of employers in my experience are still going the percentage route.

But at least if you get your employer to include RA contributions (even if only up to 27.5% of salary) you can get that cash back every month instead of waiting up to 15 months for e-filing and a lumpsum. Can then invest monthly the tax amount saved.