The vast majority of SITE taxpayers who contribute to retirement annuities are losing out on the tax savings, writes Andrew Grieveson of Grieveson & Waters Insurance Brokers.
Retirement annuities (RAs) offer tax relief in that the premium paid is deductible from taxable income before the tax calculation is applied. (The size of the deduction is subject to certain limits).
The problem is that SITE (standard income tax on employees) taxpayers generally do not submit a tax return as their employers complete the tax calculation on their behalf.
The onus falls on the employee who has an RA to inform his or her employer so adjustments can be made to the tax deducted. (This must be done by February 28 every year.)
The alternative is to submit a claim to the tax man every year. This can be a tedious task. To add insult to injury the tax certificates issued by insurance companies to policyholders are only posted in March and April each year.
The real concern here is that thousands of taxpayers are losing out on millions of rands of hard-earned income without the Receiver of Revenue making any attempt to inform the public of this rightful claim.
SITE tax was introduced partly to streamline the collection of personal tax. The administration of the collection of this tax has become the task of employers with no real regard for the employee who may have legitimate tax deductible claims.
An RA is taxed at maturity so if you do not claim tax deductions now there is little point in investing in an RA.
The insurance industry should tell their policyholders about the claim against tax. Issuing a tax certificate to thousands of clients once a year is not sufficient.
Although claims may be made by submitting an annual tax return, employees often have neither the time nor the inclination to get involved in this bureaucratic procedure.
Employees may make their claim against the Receiver of Revenue for all previous years they may have not exercised this deduction.
The following is an example of the loss incurred should the deduction not be taken:
An employee earns R55 000 a year and contributes R1 750 a year to an RA. The loss to the individual if the deduction is not taken will be in the region of R718 a year.