There are some very important things to take note of that
will be effecting us all, in this newsletter I cover the most important changes
which will have an impact on your financial plan in 2017/18.
These are:
Medical Aid Gap Cover
– New Legislation April 2017
Increased PAYE and
deductions for the new tax year starting 1 March 2017
Change in legislation Medical
Gap Cover:
Medical Gap Cover is a short term insurance product and
covers the medical gap between the medical scheme tariff and the actual cost
charged by medical specialists. Having medical gap cover in place allowed
consumers to enjoy full cover on lower medical aid schemes. Instead of taking
the more expensive medical aid options that cover 300%, they could opt for a
scheme with a 100% cover and take GAP up to 500% effectively giving 600% cover
on a 100% scheme. From 1 April 2017 this will no longer be possible to new Gap
Cover Applications and existing Gap Cover Policies will have to be amended on 1
January 2018. The new legislation coming into effect on 1 April restricts Gap
Cover to R150,000 per family per year.
The problem with this new legislation is covering major
procedures and oncology which can run into millions of rand and leaving large
differences between actual costs and the tariff paid for by your scheme. This
means that this year you will need to pay close attention to the scheme you
choose for 2018 and how you will be ensuring that you select the correct scheme
suited to your needs.
PAYE INCREASES FOR 2017/18
With personal Income Tax increases from 1 March 2017, close
attention should be paid to taxable deductions and allowances.
Retirement Annuity Contributions should be increased in
accordance to your tax tables. The best way to save for your retirement and to
enjoy a refund of your contributions from SARS. The maximum allowance is 27.5%
of your gross retirement funding income up to a maximum R350,000.
Here is an example of using a retirement annuity:
No RA Contributions
|
With RA Contributions
|
|
Gross Taxable Income (P/A)
|
R800,000
|
R800,000
|
RA Contribution (27.5%)
|
R0.00
|
R220,000
|
PAYE (Marginal Tax Rate 38%)
|
R300,720
|
R217,120
|
Rebate SARS / RA
|
R13,635
|
R13,635 + (RA) R83,600
|
Net Earnings after Tax
|
R512,915
|
R460,115
|
Earning with RA Contribution
|
R0.00
|
R680,115
|
Note: The individual with the RA contribution is better off
by R167,203
than the individual without an RA
Clearly, leveraging the use of a Retirement Annuity for tax
purposes and savings for retirement makes a lot of sense. The Discovery
Retirement Optimizer has a fee pay back and a boost of up to 35% of your
retirement savings at retirement date, which is dependent on the years left to
your retirement date.
Sincerely,
Stephen
Leppan
H.Dip Wealth Management
(USB)
Finacial
Advisor
e-mail:stephenlep@discovery.co.za
