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Thread: Calculation of retirement contributions

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    Question Calculation of retirement contributions

    Hi,

    I have an issue with the tax returns done via e-filing.

    A client changed jobs during the year of assessment. At Company A where she worked 3 months she had a pension fund and made a contribution of R2000 (code 4001) on her IRP 5. The employer also had a contribution of R1000 which was included as a fringe benefit (code 3817) and then deducted from her income (code 4472) as a deduction from her salary. She then moved to company B where they have a retirement annuity fund for employers. She made contributions of R25000 which was deducted under code (4006) and her employer made contribution of R25000 which was also taxed as a fringe benefit (code 3828) and then deducted under code (4475).

    Her maximum allowable deduction is R96 000 which is 27.5 % of her taxable income. Her contributions made is therefore well below the capped amount.

    My understanding is that she is allowed a deduction of R2000 + R1000 + R25000 + R25000 = R53 000.

    My problem is as follows:

    Her RAF certificate from PPS only shows the amount she contributed herself (R25 000). This is also the only amount filled in under 4006 on her tax return. Her tax calculation includes the R1 000 and R25 000 respectively as taxable fringe benefits but only her own contributions was allowed as a deduction (R2000 + R25000) = R27 000.

    How should the employers contribution be filled in the tax return?

    How do I prove that employer A's contribution to her pension fund and Employer B's contribution to a RAF? I asked her to contact her HR to get some sort of proof of those contribution.

    Surely these should have been deducted automatically?

    Please let me know if any of you had the same issues?

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    Quote Originally Posted by GrootBlouBek View Post
    The employer also had a contribution of R1000 which was included as a fringe benefit (code 3817) and then deducted from her income (code 4472) as a deduction from her salary.
    To avoid confusion: The amount in Code 4472 wasn't actually deducted from her salary - it was paid by the employer to the pension fund, surely.

    I was digging around researching another query along similar lines and the whole thing is slightly less than intuitive. Perhaps this will help -

    Code 3817, 4001 & 4472 relate to pension fund contributions.
    3817 and 4472 should have the value of the employer's contribution.
    4001 should have the sum value of the employee's contribution and the employer's contribution.

    Code 3828, 4006 & 4475 relate to retirement annuity fund contributions.
    Codes 3828 & 4475 should have the value of the employer's contribution.
    4006 should have the sum value of the employee's contribution and the employer's contribution.

    I found a 2016 Guide for Codes Applicable to Employees Tax Certificates quite informative. (I couldn't find a 2017 edition.)
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