A guide for executives to maximising tax savings

Contributing to a South African retirement fund allows you to deduct up to 27.5% of your taxable income (capped at R350 000 per year) for contributions to pension, provident or retirement annuity funds. Maximising these contributions can significantly reduce your tax liability while building a robust retirement portfolio.

For instance, if your taxable income before a retirement fund tax deduction is around R800 000 and you contribute around R150 000 to a retirement fund, the full amount is deductible, lowering your taxable income and thus your tax bill. To put this into perspective, using the above example, this would reduce the income tax you pay in your 2026 year of assessment by R49 725. Using the same example, if your taxable income before a retirement fund tax deduction is around R800 000, if you were to contribute the maximum tax-deductible retirement fund contribution allowed in this instance (27.5% of your taxable income) – R233,750 – this would reduce the income tax you pay in your 2026 year of assessment by around R91 000, which is substantial.

In addition to an upfront tax deduction in the relevant year of assessment, all growth on the retirement fund interest is only taxed at the point in time you access the funds. This deferred taxation on the growth of your retirement fund investment results in substantial long-term tax savings. Even small annual retirement fund contribution increases can compound into substantial savings and investment growth for your retirement.

An additional benefit is that proceeds from retirement funds will not form part of your deceased estate and will thus not attract any estate duty on the estate your loved ones will inherit.

However, it is important to note that there are restrictions on accessing your retirement funds once contributions are made, making it crucial that you understand your short-term, medium-term and long-term liquidity needs.

The recently legislated two-pot retirement system has made it possible for emergency access to your retirement funds, subject to certain limitations and tax implications that will not be covered in this article, but are crucial for you to understand before making any decisions that relate to retirement fund investments or withdrawals.

Harness the power of TFSAs

Tax-Free Savings Accounts (“TFSAs”) are ideal for executives seeking flexibility and growth. You can invest up to R36 000 per year (lifetime limit R500 000) and all return interest, dividends and capital gains are tax-free. Use TFSAs for medium to long-term goals, such as funding further education, travel or supporting family. Unlike retirement funds, TFSAs allow penalty-free withdrawals, offering agility for women navigating career transitions or family commitments.

Claim all deductions and credits

• Medical aid credits: Executives often have comprehensive medical cover. It is important to ensure you claim monthly tax credits for yourself and dependents.
• Donations to Public Benefit Organisations (“PBOs”): Support causes that matter to you. Donations to registered PBOs approved in terms of section 18A of the Income Tax Act are deductible up to 10% of taxable income, subject to certain requirements being met.

Plan for the long-term

• Understand tax on investments: Local interest earned up to R23 800 per year (for individuals under 65) is tax-free. Above this, interest is taxable, so use TFSAs and retirement funds for optimal tax efficiency.
• Balance flexibility and deduction: TFSAs offer withdrawal flexibility, while retirement funds provide larger upfront deductions but are taxed on withdrawal. A balanced approach is often best for executives with evolving financial needs.

Avoid common pitfalls, stay informed

• Missing tax deadlines: Late filing or tax payments lead to penalties and/or interest and can impact your financial standing as well as your professional reputation.
• Overlooking deductions: Many executives miss out on deductions due to a lack of awareness – it is important to stay informed and proactive.
• Not seeking expert advice: Tax law changes frequently. Due to the ever-changing tax landscape in South Africa, the cost of getting it wrong makes it advisable to obtain and retain the services of experienced tax advisors who can assist you with meeting your tax compliance obligations and make the most of tax planning opportunities. Engage a registered tax practitioner with experience in executive compensation.

Keep meticulous records

Maintain all supporting documents (IRP5s, medical certificates and proof of contributions) for at least five years. SARS may request these during an audit and strong record-keeping is a hallmark of effective tax risk mitigation.

Know your tax status, compliance obligations

Executives often receive compensation packages that include salary, bonuses, allowances and share options. It is crucial to understand your tax status and ensure all income streams are correctly declared. Register as a taxpayer with SARS if your earnings exceed the annual threshold and file returns on time – even if PAYE is deducted by your employer. Late or incorrect filings can result in penalties and reputational risk, especially for leaders in high-profile roles.

Conclusion

Smart tax management is about using every legal tool available to you. As an executive, you have several opportunities and responsibilities to optimise tax efficiency and improve your financial position. By leveraging retirement funds, TFSAs and all available deductions, you can legitimately reduce your tax burden, accelerate your financial growth and set an example for others in the industry.

^{*This article was adopted from panel discussion at the second Annual Women in Mining South Africa (WiMSA) Symposium (2025) which was moderated by the author.}

Author:

Elzahne Henn, Director - Tax Consulting