Are You Paying More Tax Than You Need To?
A simple way to make your tax work harder for you
Tax is one of those things that nobody particularly enjoys paying — but what if you could legally reduce your taxable income while simultaneously putting more money towards your retirement?
For the 2026/27 tax year, South African taxpayers have an important opportunity to do exactly that through contributions to qualifying retirement funds.
Retirement contributions can reduce your taxable income
Under South African tax legislation, contributions to a pension fund, provident fund or retirement annuity (RA) can qualify for a deduction from taxable income.
For the 2026/27 tax year, the deduction is limited to the lesser of:
27.5% of the greater of your remuneration or taxable income, or R430,000 per year.
Any qualifying contributions that cannot be deducted in the current tax year can generally be carried forward for deduction in future years.
This means that retirement planning isn't only about preparing for the day you stop working. It can also form an important part of your current tax planning strategy.
Here's a simple example
Imagine that your taxable income for the year is R1,000,000 and you make a qualifying retirement annuity contribution of R100,000.
Ignoring other deductions, rebates and individual circumstances for simplicity:
Before the contribution:
Taxable income = R1,000,000
After the contribution:
Taxable income = R900,000
The contribution therefore reduces the amount of income on which you are taxed.
Because South Africa uses a progressive tax system, the actual tax saving depends on your individual taxable income and marginal tax rate. For the 2026/27 tax year, the highest marginal individual income-tax rate is 45%.
The important point is that the R100,000 has not simply disappeared into tax. You have instead directed that money towards building your retirement savings, while potentially reducing your current tax liability.
But there is more to consider than just the tax deduction
A retirement annuity should not be selected purely because it offers a tax deduction.
When considering retirement planning, it is important to look at the bigger picture:
1. How much should you contribute?
The right contribution depends on your income, age, existing retirement savings, financial commitments and retirement goals.
2. What investment strategy is appropriate?
Your retirement savings are invested, so the underlying investment strategy can have a significant impact on your long-term outcome.
3. Are you already contributing to a pension or provident fund?
Employer retirement contributions can also affect the calculation of your available deduction. Your complete retirement-funding position should therefore be considered before deciding how much additional money to contribute.
4. What happens when you retire?
Tax planning today should form part of a broader retirement strategy. The way your retirement savings are accessed and taxed in the future is an important part of the overall picture.
Don't wait until tax season to start planning
One of the most common mistakes is thinking about tax only when your tax return is due.
Effective tax planning can be done throughout the year.
By reviewing your income, existing retirement contributions, investments and long-term financial goals before the end of the tax year, you may be able to make more informed decisions about how to structure your finances.
The 2026/27 tax year runs from 1 March 2026 to 28 February 2027.
What could this mean for you?
There is no one-size-fits-all answer.
For some taxpayers, increasing retirement contributions may be an effective way to combine long-term wealth creation with current tax planning. For others, there may be different priorities that need to be addressed first.
The important thing is to understand your numbers before making a decision.
Let's review your position
At Suikerbosrand Makelaars, we believe financial planning should look beyond the next tax return.
A proper financial plan considers your current position, your tax situation, your investments, your retirement goals and the financial future you want to create.
If you would like to understand how retirement contributions could affect your tax position and long-term financial plan, contact Suikerbosrand Makelaars for a personalised consultation.
Disclaimer: This article is intended for general information purposes only and does not constitute personal financial, tax or investment advice. Individual circumstances differ, and you should consult with an appropriately qualified financial adviser and/or tax practitioner before making financial decisions.