THIS YEAR STARTED with some good news for Namibians.
Granted we had to look for it a bit, in between all the negative reports on the economy, a lack of growth, and, of course, the ‘Januworry Blues.’
The good news concerns the tax deductibility limits on our retirement annuities, pension funds and study policies.
This gives Namibians the chance to build a nest egg on top of their existing retirement savings.
Or for those who want to pursue education, they can invest in their future through academic development and increase their employment prospects.
This amendment to the Income Tax Act was gazetted on 29 December.
It allows an 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.
This amendment allows a greater contributions allowance, thereby encouraging Namibians to invest more in long-term investments, such as retirement annuities, pension/provident funds, and educational policies.
The practical and positive implications for Namibians are as follows:
Contributions to retirement and study policies can be deducted from an individual’s gross income, meaning that at the end of the month (or annum), they would 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 terms: Before the amendment while 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 year.
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 year.
This new tax saving means investing in your retirement and educational policies really becomes 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 could go towards accessing and paying for academic development.
The impact of this cannot be underestimated.
It opens up avenues of education which have been closed to many Namibians due to a lack of resources.
A whole new generation of doctors, lawyers, academics and potential university graduates would benefit from this, which in turn would directly impact Namibia and lead to the future growth of our economy and the development of our society.
Education remains key to our socio-economic development as a nation.
The impact of the change of policy 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 fund 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 of sales, distribution and marketing at Liberty Life Namibia. He writes in his personal capacity.