Retirement funds and tax relief
Once again retirement funds were in the spotlight in this year's Budget on how to streamline fund registrations and changing pre-retirement withdrawal defaults to improve administration.
But the proposed changes have not been significant and are merely to complete the agenda that began last year, says Isabella de Matos, tax consultant at Ernst & Young.
Retirement funds have gone through changes in the last two to three years. These changes were in the form of a reduction in the tax rate from 18percent to 9percent, and finally to the abolition of the Tax on Retirement Funds Act last year.
De Matos said issues to be addressed on the proposed changes relate to taxation of retirement funds on termination of an employee's service, whether or not the funds have been withdrawn.
Another issue will relate to the taxing of retirement funds when a member dies, irrespective of whether the funds are converted to an annuity.
De Matos says the impact of these changes indicate government's commitment to encouraging individuals to save by investing in retirements funds.
At the same time, the government will limit the amount that can be contributed by employees and employers by ensuring percentage contributions of various retirement saving vehicles are consolidated.
This is to ensure that the tax relief provided is not abused by high income earners, says De Matos.