Retirement Fund Contribution Deductions Section 11F(2)(a)

5 August 2024 – Section 11F(2)(a) of the Income Tax Act was amended with effect from 1 March 2024. Where a person’s year of assessment is less than 12 months, the maximum amount of the allowable retirement fund contribution deduction may not exceed the prescribed limit (currently R350 000) for all years of assessment within the 12-month period from 1 March of that calendar year to the last day of February in the following year.

The formula to determine the allowable retirement fund contributions is set out in Section 11F of the Income Tax Act. In summary, the allowable deduction is the lesser of the following:

R350 000; or

s11F(2)(a)

27.5% of the greater of –

Remuneration (excluding retirement lump sum benefits, withdrawal lump sum benefits and severance benefits); or
taxable income (including passive income and taxable capital gains) but excluding retirement lump sum benefits, withdrawal lump sum benefits and severance benefits and before any s11F and s18A deduction; or

s11F(2)(b)

The taxable income (excluding any taxable capital gain and retirement lump sum benefits, withdrawal lump sum benefits and severance benefits) and before any s11F and s18A deduction.

s11F(2)(c)

Example : 1

Mr Taxpayer was classified as insolvent on 31 October 2024. For the 2025 years of assessment, the allowable retirement fund contribution deduction (i.t.o s11F(2)(a)) will be applied as follows:

Period of assessment: 1 March 2024 – 31 October 2024

This assessment applies to Tax Reference Number 1 – the original tax number coded as insolvent and applicable to assessments preceding the date of sequestration
The allowable retirement fund contribution deduction that was utilised for this assessment is R200 000

Period of Assessment: 1 November 2024 – 28 February 2025

This assessment applies to Tax Reference Number 3 – Mr Taxpayer’s new tax number applicable to assessments from date of sequestration.
The retirement fund contribution deduction allowable is R150 000 (i.e. R350 000 less R200 000 utilised in the first ‘period assessment’ that falls within the same 12-month period from 1 March of that calendar year to the last day of February in the following year).

Note: Tax reference number 2 is an optional tax number registered for the ‘insolvent estate’ and is managed by the court appointed administrator/trustee. It is applicable to assessments from the date of sequestration until the estate is finalised. Section 11F does not apply to this tax number.

Example: 2

Mr Taxpayer ceased to be a tax resident on 31 July 2024. For the 2025 years of assessment, the allowable retirement fund contribution deduction (i.t.o s11F(2)(a)) will be applied as follows:

Period of Assessment: 1 March 2024 – 31 July 2024

This applies to Mr Taxpayer’s assessment as a South African tax resident
The allowable retirement fund contribution deduction that was utilised for this assessment is R350 000

Period of Assessment: 1 August 2024 – 28 February 2025

This applies to Mr Taxpayer’s assessment as a non-tax resident
There will be no retirement fund contribution deduction for this assessment as the allowable amount i.t.o. section 11F(2)(a) was fully utilised in the first period assessment that also falls within the same 12-month period from 1 March of that calendar year to the last day of February in the following year.

For more information, see the updated guide:

IT-AE-36-G05 – Comprehensive Guide to the ITR12 Income Tax Return for Individuals – External Guide