Ensuring your client is better positioned for tax relief

With the end of the tax year around the corner, what better way for your clients to take advantage of tax concessions by boosting their savings?

If you haven’t yet done so, this is an opportune time to chat to your clients about topping up their retirement annuities (RA) or Tax-Free Savings Account (TFSA).

As you know, doing so before 28 February means they can benefit from tax concessions for the 2019/20 tax year and still claim a tax refund on their existing RA contributions this year. Clients will also quality for tax relief on an RA or TFSA with a start date and deduction date in February 2020.

For those who aren’t yet invested in either, it may be worth sharing the benefits of each so your client can make an informed decision.

Additionally, be sure to familiarise yourself with the application process when submitting your client’s applications to Savings New Business to ensure they qualify for tax relief.

Make sure all the correct documents are received and the funds reflect by 28/29 February

When doing a conversion, ensure the start date reflects 1 February or earlier

Some legacy products no longer allow clients to add an ad hoc contribution to their policy. (You can approach your consultant in this regard). However, in some cases, it is possible to convert the legacy policy to a Cumulus Echo RA Conversion plan. The conversion must be done with a start date on or before 1 February 2020 in order for Sanlam to add the ad hoc once-off payment contribution with an alteration after the conversion has been issued.

Understand what would and what would not qualify for tax relief

  • In the case of an alteration and/or the investment of compulsory money, Savings New Business can only issue the plan once the payment reflects on the plan itself. Sanlam can therefore not issue with proof of payment only. However, the client will still qualify for tax relief on condition that the ad hoc contribution and documentation is received on or before 28 February 2020.
  • In the event of a Stratus NUB once-off plus recurring payment plan, it’s crucial to be guided by the start date of the plan. If the start date is indicated as 1 March 2020, but the one-off payment was made, for example, on 21 February 2020, this will unfortunately not qualify for the 2019/20 tax period.

Reason: The commencement of the plan only occurs once the recurring portion of the plan is implemented. If the one-off payment is made before the recurring payment and it is the client’s desire to have it qualify for tax relief, we will only be able to accommodate the request if the client takes out two plans (one for the one-off payment and one for the recurring).

Encourage your clients to pay ad hoc contributions via direct deposits or electronic transfers instead of debit order. This will save you and your client time and prevent potential delays.

Make sure you deposit funds before the following cut off dates – applicable to both Savings NUB and Savings Alteration (Ad hoc):

  • 27 February 2020: If you’re doing an electronic transfer, don’t wait until the last week – rather get in ahead of time!
  • 28/29 February 2020: Manually at an Absa/FNB/Standard Bank cashier or ideally via EFT during banking hours. Electronic funds transferred after bank closing on 29 February will only reflect on 1 March 2020.