No clarity on tax on pension funds

Posted On Friday, 01 February 2002 03:01 Published by
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Retirement fund trustees and advisers are still in the dark about the future taxation of pension funds. It is still unclear as to whether government intends scrapping the tax laws regulating pension funds,
Retirement fund trustees and advisers are still in the dark about the future taxation of pension funds. It is still unclear as to whether government intends scrapping the tax laws regulating pension funds, or amending them.

NMG-Levy Consultants & Actuaries benefits adviser Aubrey Austin, says the 'golden years' of millions of South Africans are clouded by uncertainty because of government's failure to set out its pension fund policy clearly.

Austin says government has not told pensioners where they stand on issues such as tax exposure and entitlements to surpluses.

Uncertainty about the future tax treatment of pension funds goes back about five years.

In 1996, a 17% retirement funds tax was introduced. Austin says the measure appeared opportunistic as it taxed prudent investments by those nearing retirement, such as rental income and gross interest on cash and near-cash.

He says many assumed it would be removed as soon as the Katz Commission review of taxation policy was complete, but retirement funds tax was stepped up in 1997 to 25%.

Austin says: 'There is renewed speculation that the tax may be removed or moderated in an overall review prior to the extension of capital gains tax (CGT) to the statutory savings environment.'

CGT came into effect last year, but retirement funds were specifically excluded for two years.

Austin says it would be logical to review the tax dispensation covering retirement funds, but government had made no firm commitment.

Publisher: Business Day
Source: Business Day

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