Retirement Annuity Tax Deduction in South Africa: The Section 11F Rule

Fast answer: For the year of assessment ending 28 February 2026, your retirement fund contributions are tax-deductible up to the lesser of three numbers – R350,000, 27.5% of the greater of your remuneration or taxable income, or your taxable income (before any taxable capital gain). Whichever of those three is smallest is your deduction ceiling for the year. And here's the part most guides skip: if you contribute more than the ceiling allows, you don't lose the excess – it carries forward to next year.

That's the whole rule. The rest of this guide explains the reasoning so you can work out your own number with confidence.

How the section 11F deduction works (the lesser of R350k / 27.5% / taxable income)

Section 11F of the Income Tax Act governs the deduction for contributions to all your retirement funds – pension funds, provident funds and retirement annuity (RA) funds – combined. You don't get a separate allowance for each fund; they share one limit.

SARS caps your allowable deduction at the lesser of:

R350,000; or
27.5% of the greater of your remuneration or your taxable income; or
your taxable income (calculated before including any taxable capital gain).

"Lesser of" means you calculate all three and take the smallest. The R350,000 is a hard annual ceiling no matter how much you earn. The 27.5% scales the limit to your income. And the third test simply stops the deduction from ever exceeding your taxable income – you can't deduct yourself below zero.

Heads-up for next year: the R350,000 cap applies to the 2026 year of assessment. Budget 2026 raises it to R430,000 from 1 March 2026 (the 2027 year of assessment) – its first increase since 2016. The 27.5% rate is unchanged. SARS – Budget 2026 FAQ.

For most salaried people earning under roughly R1.27 million, the 27.5% test is the binding one. For high earners, the R350,000 cap kicks in first.

What "27.5% of the greater of remuneration or taxable income" really means (worked example)

This phrase trips people up, so it's worth slowing down. SARS doesn't apply 27.5% to your salary alone, nor to your taxable income alone. It applies it to whichever of the two is bigger.

Remuneration is broadly your employment income (salary, bonus, commission, fringe benefits).
Taxable income is your total income from all sources after allowable deductions – which can include rental profit, interest, business or freelance income.

Why does "the greater of" matter? Because if you have income beyond your salary – rent from a flat, freelance fees, investment income – your taxable income may be higher than your remuneration. The 27.5% then applies to that larger figure, lifting your contribution ceiling.

Quick example. Thandi earns a salary (remuneration) of R600,000 and also makes R150,000 net profit from a rental property, giving her a taxable income of R750,000.

27.5% of remuneration (R600,000) = R165,000
27.5% of taxable income (R750,000) = R206,250

SARS uses the greater base (R750,000), so her 27.5% limit is R206,250, not R165,000. Her rental income just bought her R41,250 of extra deductible contribution room. This is exactly why people with investment or rental income can often contribute more than they expect.

Carry-forwards: why you don't lose excess contributions (s11F carry-forward, and how it helps at retirement)

Suppose you contribute more than your section 11F limit in a given year. The amount above the limit isn't deductible this year – but it is not forfeited. The disallowed (excess) amount is carried forward to the next year of assessment, where it's treated as a contribution you made in that next year.

In practice the excess sits on your record and gets a fresh chance at deduction every year, against each new year's limit, until it's used up. This is what makes "over-contributing" relatively painless and why a windfall year (a bonus, an inheritance, a good business year) can sensibly be parked in an RA.

The value doesn't stop at the deduction. Any excess contributions still unused at retirement are worth real money:

they can be set off against retirement fund lump sums, reducing the tax you pay when you take your lump sum; and
they can be deducted against your annuity (pension) income in retirement, lowering the tax on your monthly pension.

So a carry-forward is never dead money – it's tax relief deferred, not denied. (For how lump sums are taxed at retirement versus early withdrawal, see our guide on retirement vs withdrawal lump sum tax.)

Why RAs are one of the few remaining legal tax breaks (reasoning, not hype)

We'll be plain about this: the retirement annuity deduction is genuinely one of the most generous deductions still open to ordinary South African taxpayers. The reasoning, not the sales pitch:

It reduces taxable income directly. A deductible contribution comes off the top of your income, so it's relieved at your marginal rate. If you're in the 39% bracket, every R100 you contribute saves you R39 in tax this year.
Growth inside the fund is tax-sheltered. Interest, dividends and capital gains inside an RA are not taxed while they accumulate – unlike a normal investment account where interest and capital gains are taxed as you go.
The limit is high. At up to R350,000 a year, the room is far larger than most people use.

The trade-off is liquidity: RA money is locked until at least age 55. That's the discipline that earns the tax break. It isn't a loophole – it's Parliament deliberately rewarding long-term retirement saving. The point of this guide is the reasoning behind the number, not hype: you should contribute because the after-tax maths works for you, not because "RAs save tax."

A worked example (show the reasoning end-to-end)

Let's run the full section 11F logic for one person, for the 2026 year of assessment.

Sipho's numbers:

Remuneration (salary + bonus): R800,000
Net rental profit: R100,000
Taxable income (before any capital gain): R900,000
He'd like to contribute R250,000 to his RA this year.

Step 1 – find the three limits.

The cap: R350,000.
27.5% of the greater of remuneration (R800,000) or taxable income (R900,000). The greater is R900,000, so 27.5% × R900,000 = R247,500.
Taxable income (before capital gain): R900,000.

Step 2 – take the lesser. The smallest of R350,000, R247,500 and R900,000 is R247,500. That's Sipho's deduction ceiling.

Step 3 – apply it. Sipho contributed R250,000 but can only deduct R247,500 this year. The remaining R2,500 is carried forward to the 2027 year of assessment and treated as a contribution made then.

Step 4 – the saving. At a 41% marginal rate, the R247,500 deduction saves Sipho roughly R101,475 in tax this year – and the R2,500 carry-forward is still available to relieve next year (or at retirement). Nothing is wasted.

Frequently asked questions

What is the maximum RA tax deduction in South Africa for 2026? The maximum is the lesser of R350,000, 27.5% of the greater of your remuneration or taxable income, or your taxable income before any capital gain. R350,000 is the absolute ceiling for the year of assessment ending 28 February 2026.

Does the 27.5% apply to my salary or my total income? To the greater of your remuneration or your taxable income. If you have rental, freelance or investment income that pushes your taxable income above your salary, the 27.5% is applied to that higher figure – so your contribution room is larger.

What happens if I contribute more than the section 11F limit? The excess isn't lost. It's carried forward to the next year of assessment and treated as a contribution made in that year, where it can be deducted against that year's limit – and any excess still unused at retirement can offset lump sums and pension income.

Do pension, provident and RA contributions share one limit? Yes. Section 11F applies one combined limit across all your retirement funds. Contributions to a workplace pension or provident fund and a private RA are added together and tested against the same lesser-of-three ceiling.

Can carry-forward amounts ever be used if I never deduct them? Yes. Unused excess contributions at retirement can be set off against your retirement lump sums and deducted against your annuity income, so they keep working even if you never breach the annual limit again.

See your retirement-contribution tax saving

Want the exact number for your income – including rental, freelance and investment earnings, and any carry-forward from a previous year? Our Comprehensive calculator runs the full section 11F lesser-of-three test for the 2026 year of assessment, shows you your precise deduction ceiling, and – true to our promise – explains the reasoning behind every line, not just the final figure. Work out your saving now.

SARS sources: