Brendan Burgess
Founder
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Here is a draft answer for the Indo. Am I on the right track?
I have some questions about backdating AVCs.
1/ Can it be taken from your redundancy payment to reduce your tax
liability ?.
2/ Can it be done from savings & claim back tax that has already been paid
on that money ?.
3/ Can you overpay on your % allowance & claim it as backdated payments ?.
I may soon be in a position where I will want to make full use of
backdating my AVC's.
Thank you
Eddie Lynch.
First of all a general note. You cannot normally backdate AVCs. Say, you are entitled to contribute 20% of your salary and your AVC brings you up to 30%. The 10% excess will be carried forward to the following year. If there are exceptional circumstances such as redundancy, where you will not have an income to carry forward the excess against, you may make an exceptional case to the Revenue to carry it back. You should get this approval before you make the contribution. The tax year end for AVCs is 31 December, so the 31 October deadline for personal pensions has no relevance.
Now to your specific questions:
1) The source of your AVCs doesn't matter, so yes, you can use your redundancy money. When making a contribution within the 20%, it is better to have it deducted from salary, so that you get PRSI relief as well as tax relief on it.
2) Yes it can be taken from savings. If you make an AVC you save money at your marginal tax rate on your income. You are not claiming back tax on your savings as such.
3) The excess will be carried forward automatically, unless you make a special case to the Revenue Commissioners.
I have some questions about backdating AVCs.
1/ Can it be taken from your redundancy payment to reduce your tax
liability ?.
2/ Can it be done from savings & claim back tax that has already been paid
on that money ?.
3/ Can you overpay on your % allowance & claim it as backdated payments ?.
I may soon be in a position where I will want to make full use of
backdating my AVC's.
Thank you
Eddie Lynch.
First of all a general note. You cannot normally backdate AVCs. Say, you are entitled to contribute 20% of your salary and your AVC brings you up to 30%. The 10% excess will be carried forward to the following year. If there are exceptional circumstances such as redundancy, where you will not have an income to carry forward the excess against, you may make an exceptional case to the Revenue to carry it back. You should get this approval before you make the contribution. The tax year end for AVCs is 31 December, so the 31 October deadline for personal pensions has no relevance.
Now to your specific questions:
1) The source of your AVCs doesn't matter, so yes, you can use your redundancy money. When making a contribution within the 20%, it is better to have it deducted from salary, so that you get PRSI relief as well as tax relief on it.
2) Yes it can be taken from savings. If you make an AVC you save money at your marginal tax rate on your income. You are not claiming back tax on your savings as such.
3) The excess will be carried forward automatically, unless you make a special case to the Revenue Commissioners.