Dr X closed his practice during the 2019 tax year. During the 2020 tax year he earned a salary. He has a Retirement Annuity amount brought forward from 2019.
Is he allowed to claim the full Retirement Annuity brought forward as he has retired, or is it still limited to the 27.5%?
Simply put, section 11F of the Income Tax Act allows as a deduction in respect of contributions to retirement funds, a maximum of the lesser of:
The ‘excess amount’, the balance carried forward from the previous year, is in the first instance, added to the contributions made in the current year and then becomes subject to the limitation mentioned above. It is only where a lump sum is taken that the excess contributions can be deducted, and then the deduction is made against the lump sum.
Further webinar commentary on Deductions claimable by the employee iro contributions to retirement funds can be accessed here.