Results 1 to 2 of 2

Thread: Employer not handling my Cost to Company to my best advantage tax-wise?

  1. #1
    New Member
    Join Date
    Dec 2011
    Location
    JHB
    Posts
    2
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Employer not handling my Cost to Company to my best advantage tax-wise?

    Good day, my employer 'makes' a contribution on my behalf to the in-house retirement fund of 7.5% plus another 4.5% (ouch) for disability and death cover. They then make a contribution of 7.5% from my 'pensionable salary' before tax which is 'my' contribution. This is acording to the fund rules, but it's actually all 'my' salary as the company has a cost to company model.

    1. I pay a fringe benefit tax on my employer's contribution. As my salary is Cost to Company it seems rediculous that my company must pay a contribution on my behalf which is then subject to fringe benefit taxation. Yes this is according to the fund rules but these rules can be changed. Is my understanding, as outlined above, correct that this practice is not in my best interests and the trustees are falling down on their responsibility to their members? Please could suitably knowledgeable forum members comment/advise.

    2. PMy employer does not seem to get it that there is no longer such a concept such as 'pensionable salary' from a taxation point of view and do not seem to care about or want to acknowledge the retirement tax reforms. Please comment.

    I believe that for the tax implications alone I could do a better job investing for my retirement myself in an RA, investing a healthy 27.5% tax free, but the company has made membership of their fund compulsory. I do already contribute the difference between 27.5% and my contributions to the company to an RA.

  2. #2
    Site Caretaker Dave A's Avatar
    Join Date
    May 2006
    Location
    Durban, South Africa
    Posts
    20,979
    Thanks
    3,055
    Thanked 2,462 Times in 2,067 Posts
    Blog Entries
    12
    Quote Originally Posted by fondmama View Post
    1. I pay a fringe benefit tax on my employer's contribution.
    Not really. Although the company contribution is added to your income nowadays, it is also deducted from your total income for purposes of calculating your income tax payable. When it comes to income tax, the change has a zero effect on your income tax payable.

    Quote Originally Posted by fondmama View Post
    2. PMy employer does not seem to get it that there is no longer such a concept such as 'pensionable salary' from a taxation point of view
    The differentiation between retirement funding income and non-retirement funding income on an IRP5 has been a technicality in most instances for years already. However, as long as SARS keeps the two fields on the IRP5, employers have little choice but to differentiate and track the two.
    The trouble with opportunity is it normally comes dressed up as work.

Similar Threads

  1. What does SA need import wise?
    By cyppokagain in forum General Business Forum
    Replies: 8
    Last Post: 09-May-14, 06:13 AM
  2. Manufacturing company cost price in Pastel Partner v11
    By paulsevenster in forum Accounting Forum
    Replies: 2
    Last Post: 25-Feb-14, 04:15 PM
  3. Tax handling on company pension contributions
    By Dave A in forum Tax Forum
    Replies: 4
    Last Post: 24-Mar-13, 08:03 AM
  4. wise or con
    By nicsai in forum Business Finance Forum
    Replies: 3
    Last Post: 07-Sep-11, 10:20 AM
  5. Direct Advantage
    By srt in forum MLM Industry Forum
    Replies: 9
    Last Post: 01-Oct-10, 01:08 PM

Did you like this article? Share it with your favourite social network.

Did you like this article? Share it with your favourite social network.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •