RTA

Tax Season 2025

2025 is well on its way and with that come the inevitable end of the 2025 tax year and the start of the next one on 1 March 2025. Up and until the end of February clients can make use of the relevant tax benefits of retirement annuities and tax-free investments. What are the key tax benefits of saving in a retirement annuity (RA)?

  1. Tax Deduction on Contributions: Contributions to your RA reduce your taxable income, meaning you pay less income tax. You can contribute up to 27.5% of your taxable income or remuneration, limited to R350,000 per year.
  2. Section 10C Powertool: If you contribute more than the allowed amount an array of tax benefits become available.

a.    R 10 mil cash invested in the bank will amount to R 14,4 mil after 10 years, considering tax.

b.  R 10 mil cash invested directly in to a RA will amount to R 24 mil after 10 years.

  1. Tax-Free Growth: While invested in an RA, your returns are exempt from dividends tax, income tax on interest, and capital gains tax.
  2. Tax-Free Lump Sum Withdrawal: Upon retirement, the portion of your lump sum withdrawal up to a specified limit is exempt from tax

Tax-Free Investment Account (TFI)

  1. Tax-Free Growth: You can invest up to R36,000 per year (R500,000 lifetime limit) in a TFI account. Growth in this account is exempt from dividends tax, income tax, and capital gains tax.
  2. Tax-Free Withdrawal: You can withdraw funds from this account, to supplement income, or capital expense without paying any tax.
  3. Contribution Limits: Exceeding the annual limit will incur a 40% tax penalty from SARS.

Which product is right for you? RAs offer the best tax benefits for retirement savings, though access to funds is more restricted than with a TFI. It’s beneficial to use both products for different needs depending on your long-term strategy. If you need assistance or haven’t reached the contribution limits, please contact us by 21st of February for guidance.

wealth@rta.co.za 021 914 0055