National Treasury’s recent announcement accompanying the draft Taxation Laws Amendment Bill, 2014 (the Bill) confirms the speculation around the postponement of the changes to the tax treatment of retirement savings. The changes were set to impact the tax treatment of contributions to retirement funds and require the annuitisation of provident fund pay-outs. The effective date, which would have been 1 March 2015, will now be delayed for one, or possibly, two years.
During the hearings in Parliament on 15 October 2014, the Standing Committee on Finance made recommendations on the implementation dates for the tax treatment of retirement savings and the removal of VAT zero rating for agricultural goods. The Bill has been updated based on these two recommendations. Promulgation of the bill has been delayedfor a year to allow for further consultations at NEDLAC (“National Economic Development and Labour Council”). However, the implementation date may be moved to 1 March 2017 should there be no agreement at NEDLAC by the end of June 2015. The main reason for labour’s request for postponement is to allow for further consultations between Government and NEDLAC on social security reform.
The current changes to the law are extensive and affect many different stakeholders such as employers, retirement funds, fund administrators, payrolls, trustees, principle officers and, most importantly, members. Retirement contributions have, for years, run on autopilot once the initial decisions were made. Members joined and often contributed at set rates irrespective of personal circumstances and needs. The retirement reform changes have acted as a catalyst for employers of choice to conduct a comprehensive review of their retirement and risk offerings.
Whilst it is not expected that the fundamentals around the proposals will change, stakeholders will understandably be reluctant to affect further changes to their systems, processes and rules, without the certainty that the legislation is once more ‘set in stone’. However, stakeholders are urged to continue their engagement with Government to ensure that the final proposal is practical and fit for purpose.
At the very least, responsible employers should capitalise on the newfound interest in the area and optimise their retirement and risk offerings in view of Government’s stated policy imperatives. If you are unsure, the best practice is to consult a retirement savings tax expert who can analyse your circumstances and advise you accordingly.