Boost your retirement and education savings with the taxman’s help
The year 2023 has started with some good news for Namibians. Granted, we did have to search for it a bit, in between all the negative reports on the economy, lack of growth and of course the ‘Januworry Blues’.The good news concerns the tax deductibility limits on our retirement annuities, pension fund and study policies. This gives Namibians the chance to build a nest egg on top of their existing retirement savings. Or for those that want to pursue education, they can invest in their future through academic development and increasing their employment prospects.
This amendment to the Income Tax Act was gazetted on 29 December 2022. It allows for the increase in the deductibility limit from N$40 000 to N$150 000 per annum on your gross income, applied retrospectively for the tax years commencing 1 March 2022.
The Tax Amendment allows for a greater contributions allowance, thereby encouraging Namibians to invest more in long-term investments such as retirement annuities, pension/provident funds, and educational policies.
Practical and positive implications
Contributions to the retirement and study policy can be deducted from an individual’s gross income, meaning that at the end of the month (or annum), they will pay less tax every month (or annum). Simply put – they benefit by being able to put those savings into their retirement, pension/provident or study policies instead of handing it to the tax man.
To put it into monetary value terms, before the amendment whilst saving and investing into a retirement annuity or educational policy your tax saving was a maximum of approximately N$3 300 per month and you could only invest a maximum of N$40 000 per annum. With the amendment in place from this year, the saving on the investment increases to more than N$6 000 per month and the threshold has been increased to N$150 000 per annum. This new tax saving means investing in your retirement and educational policies really become worth it.
This new tax amendment will have a positive impact on educational investment as well. As we know, pursuing education, especially tertiary education is often prohibitively expensive. With the increase of the taxable threshold, more money can go towards accessing and paying for academic development. The impact of this cannot be underestimated as it opens avenues of education that have been closed to many Namibians due to a lack of resources.
Beneficiaries
A whole new generation of doctors, lawyers, academics, and potential university graduates will benefit. Which in turn will directly impact Namibia and lead to the future growth of our economy and development of our society.
Education remains key to our socio-economic development as a nation. The impact of the change of portfolio for our country cannot be underestimated and our Ministry of Finance must be commended for championing this amendment.
It all starts with having, upgrading, reviewing, or investing in a pension/provident policy, retirement annuity or education plan for present and future endeavours.
Getting your finances in order and making your money work for you, should be a priority. It’s a form of minding your money and this should be everybody’s mantra in 2023, and beyond. With the right advice and right retirement annuities and educational policies in place, Namibians can make the new tax amendment work to their advantage.
* Warren Kozonguizi is the Head: Sales, Distribution & Marketing at Liberty Life Namibia.
** Opinion pieces and letters by the public do not necessarily reflect the opinion of the editorial team. The editors reserve the right to abridge original texts. All newspapers of Namibia Media Holdings adhere to the Code of Ethics for Namibian Media, a code established jointly with the Media Ombudsman.