Investec Nov 2015

Investec Investment Management Services

Legal & Tax Update

Janine Bredenkamp

November 2015

2 Confidential | Investec Investment Management Services

Agenda

TLAB 2015

Draft Default Regulations

Davis Tax Committee Report on

ED


Davis Tax Committee – Interim Report on Estate Duty

Retirement funds

Donations Tax

Estate duty Inter-spouse bequest Primary abatement

Trusts



Trusts

41% tax rate to be

maintained (effective CGT rate 27.3%)

Resident trusts:

sections 7 & 25B

deeming provisions

to be repealed

Special trusts: retain status

Non-resident

trusts: all distributions

taxed as income



• Trusts taxed at highest rate

• Assets distributed – CGT

• Taxes on transfer of assets to trust

• Use of interest free loans

Trusts:

Report ignores



Trusts valuable:

• Trusts protect assets from:

• Financially unsophisticated spouses / children

• Minors

• Elderly

• Creditors

• Other persons with poor financial skills

• Agricultural land

• Charitable purpose



• Estate Duty to be retained at current rate of 20%

Estate Duty



• Exemptions / roll-overs to be withdrawn or limited – section 4(q) deductions

Inter-spouse Bequest

• Inter-spouse exemption to be retained BUT interests in fixed property or companies excluded

Donations Tax



• Primary abatement to be increased to R6m per taxpayer

• Total max abatement for first-dying spouse R12m (reverse roll-over)

Abatements

• Disallowed contributions remaining at death – ED

• Reflected in TLAB 2015

Retirement funds & ED


Taxation Laws Amendment Bill 2015

Deduction of contributions to ALL retirement funds

27.5% of greater of remuneration / taxable income, capped at R350,000

Roll over relief Further tax relief at retirement, after

retirement, at death

Employer contributions – fringe benefit

Effective

1 March 2016

Summary:

• Contributions of all retirement funds added together, including

employer contributions

• Percentage and monetary caps

• Roll over – even at and after retirement



Provident fund annuity alignment

Option 1

Exception 1:

Vested rights protected (plus growth)

Exception 2:

Investors 55 & older

Exception 3:

De minimus

R247 500 ?

Annuitisation required – max 1/3 at retirement

Effective

1 March 2016

Summary:

• All retirement funds treated the same: max 1/3 at retirement

• For provident funds: certain exceptions • Vested rights

• Investors 55 and older on implementation

• De Minimus



Provident fund annuity alignment

Option 2

Phased in approach

2A:

• 2016/17

• No annuitisation,

• deduction 27.5% / R350 000

• 2017/18

• Required to annuitise,

• full vested rights for over 55

2B

• 2016/17


• tax deduction 27.5% / R350 000

• 2017/18


• tax deduction of 10% / R125 000

• 2018/19

• Required to annuitise,

• full vested rights for over 55

2C

• 2016/17


• tax deduction 27.5% / R350 000

• 2017/18



• 2018/19



:



Disallowed contributions subject to estate duty

Proposal: Amount equal to disallowed contributions remaining at death…

Applicable to persons who pass away on/after 1

January2016

ASISA comment: should apply to contributions made

on/after 1 March 2015

…to be included in estate for ED

purposes

Davis Tax Committee Report also suggests only applicable to contributions

made on/after 1 March 2015

Summary:

• Disallowed contributions left over at death – ED payable

• Applicable to investors who pass away on/after 1 January 2016

• ASISA & Davis Tax Committee – should only apply to contributions

made on/after 1 March 2015


TLAB 2015 – impact on RA’s

Provision for retirement

Income tax saving on contributions, lump sum or annuity (if disallowed contributions)

No income tax, CGT or DWT in the fund – maximum growth

Protection against creditors

No ED (excluding disallowed contributions) or executor fees (investment paid to dependent /

nominated beneficiary)

Start saving early for maximum

benefit!



Draft regulations published under the Pension Funds Act – retirement

funds to provide members with:

Default

Preservation

Investment portfolios

Annuity strategies



Default investment portfolios

• All funds must have default portfolio, unless exempted

• Members must inform fund in writing if he/she wishes to invest in another portfolio

• Portfolio must be appropriate for members

• Fees & charges regularly disclosed

• Boards to consider passive investments as part or all of portfolios

• Performance fees & loyalty bonuses not permitted

• Regulation 28

• Default portfolio to be reviewed regularly



Default preservation rules

• On termination of employment, become “paid-up member” of fund

• Receive paid-up membership certificate within 1 month of leaving employer

• New employer’s fund must request paid-up certificate & automatically transfer

benefits to new fund

• May still select a full withdrawal or transfer to another fund of member’s choice

• Roll of retirement benefit counsellor



Default annuity strategies

• Various products can form part of default annuity strategy

• In fund guaranteed annuity

• In fund living annuity

• In fund with profits annuity

• Out of fund guaranteed annuity

• Member may still elect to transfer to annuity of choice

• Default annuities subject to Reg 28

• Meet with retirement benefit counsellor 3 months before retirement – discuss

options

• Living annuities - age related draw-down rates

Thank you!

www.investecassetmanagement.com


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Investec Nov 2015

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