Staff author
The easiest way to pay SARS less? Pay your future self first
Putting money into a retirement annuity (RA) shrinks your current tax bill while building your retirement savings. It is the most effective legal method available to lower the amount of tax you owe SARS every year.
How it works
Section 11F of the Income Tax Act allows you to deduct your RA contributions up to 27.5% of your taxable income. To prove your contributions to SARS, you need the IT3(f) tax certificate issued by your investment fund. Auto-assessments frequently miss late payments, meaning you have to manually check your figures.
Specific Scenarios
* Scenario 1: The monthly saver. You contribute R2,000 a month to an RA via debit order. At the end of the tax year, your fund sends you an IT3(f) certificate for R24,000. You input this into your tax return to reduce your taxable income.
* Scenario 2: The February top-up. You get an annual bonus and invest R50,000 into your RA just before the tax year closes in February. You manually add this late certificate to your tax return to massively boost your refund.
* Scenario 3: The independent contractor. You do not have an employer pension fund, so you open a private RA. You deposit 15% of all your earnings into the fund throughout the year, claiming the full amount as a tax deduction.
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When you are not eligible
You cannot claim a deduction for contributions that exceed the 27.5% income limit or the absolute cap of R350,000 per year (which increases to R430,000). You also cannot claim a deduction for money sitting in a standard bank savings account; it must be a registered retirement product.
Ready to get your tax refund increase?
Complete TaxClaw’s 5-minute AI questionnaire to review your financial position against your auto-assessment. We’ll help you find ways to increase your refund and can optionally file the correction for you. We also available via email at hello@taxclaw.ai and via WhatsApp by clicking this link
Disclaimer:This article is for informational purposes only and does not constitute financial or tax advice, and is not exhaustive. Tax laws are complex and subject to change. We strongly recommend consulting with our registered tax practitioner to address your specific circumstances.