A common question from readers concerns tax breaks for pensioners. People over 65 can potentially receive up to R124228 tax-free.

The tax threshold for a person over 65 has been increased to R88528. This means that, if the pensioner receives a monthly pension or monthly annuity income (from one source) totalling R88528 a year, he or she will not be liable for tax on that amount.

The same pensioner will qualify for a further exemption of R32000 a year on any investment income (that is, interest received on investments).

This means interest of up to R32000 a year on investments will be tax-free. The total of these two sources of income (pension/annuity income and investment income) brings you to an amount of R124228 a year that will be free of tax.

The same scenario will apply to a pensioner under 65.

However, the tax threshold in this case would be R57000 (relating to the pension/annuity income per annum) and the exemption that the pensioner will qualify for is R22300 a year on interest received from investments.

The total of these two sources of income (pension/annuity income and investment income) brings you to an amount of R79300 a year free of tax.

Should a pensioner, however, receive income from an annuity or an annual pension of say R204000, the income will be subject to tax at the normal tax-deduction rates prescribed by SARS.

The tax threshold is not a deduction or exemption but is merely all the rebates expressed as a taxable income.

Effectively you will start paying tax (at a rate of 18%) only from R57001 if you are under 65 and from R88529 if you are over 65 (that is, if the tax is calculated on R57000 for the year and the rebates are deducted, the net effect is nil).

The effective tax rate for a person under 65 earning R204000 a year would be 15%.

- Mark Goulding is director for Human Capital at Ernst & Young