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Max AVC percentage of salary for age - Does it include BIK and overtime payments

  • 02-09-2018 8:27am
    #1
    LotharIngum
    Registered Users, Registered Users 2 Posts: 210 ✭✭


    This is a question I find it hard to get an answer to.
    I wonder good anybody here give me some clarity on it.

    Im just using round easy to calculate figures for the example.

    My employer pays me 10% into my pension without me having to contribute.

    But my question is about my AVCs on top of that 10% that they pay.

    If I earn €80,000 salary and am 41 years old I assume I can pay 25% (€20,000) and get the full tax relief on that.

    But if I Earn €80,000 salary and then also do overtime and get BIK totaling another €20,000 (eg VHI that the company pays for me, Accommodation allowance they pay me, Overtime that I earn) does that mean that I can pay 25% of 80k plus 10k = €24,000 and get the full tax relief on that €24k AVC.

    My employer tells me that it is only 25% of my base salary, but should it not be 25% of everything that they pay me that is taxable.


Comments

  • #2
    Heres Johnny
    Closed Accounts Posts: 2,738 ✭✭✭Heres Johnny


    You can contribute up to 25% of net relavent earnings at your age up to a max income of 115k.

    Net relevant earnings are anything included in your gross pay for the purposes of calculating your tax liability.

    BIK and overtime are net relevant earnings and are taxable therefore count towards tax relief.

    If your accommodation allowance is taxable, which it might be if it's a flat rate expense and not a reimbursement type setup, then it could be included too.

    I think your employer might be capping the 10% to your basic pay only to keep costs down, which is fair enough, but confusing it with tax relief.


  • #3
    LotharIngum
    Registered Users, Registered Users 2 Posts: 210 ✭✭LotharIngum


    Thankyou for that explanation.

    That is very clear. It helps me a lot.

    I now have something I can go to them with.


  • #4
    EverythingGood
    Registered Users, Registered Users 2 Posts: 2,003 ✭✭✭EverythingGood


    Heres Johnny wrote: »
    You can contribute up to 25% of net relavent earnings at your age up to a max income of 115k.

    Net relevant earnings are anything included in your gross pay for the purposes of calculating your tax liability.

    BIK and overtime are net relevant earnings and are taxable therefore count towards tax relief.

    If your accommodation allowance is taxable, which it might be if it's a flat rate expense and not a reimbursement type setup, then it could be included too.

    I think your employer might be capping the 10% to your basic pay only to keep costs down, which is fair enough, but confusing it with tax relief.

    I don't think any of the above is correct. To the best of my knowledge it is only given on your base salary. Check with revenue or a tax expert to be 00% sure.

    https://www.ccpc.ie/consumers/money/pensions/adding-pension-avcs/

    I don't think your HR dept would lie over a matter like this.


  • #5
    Bubbaclaus
    Registered Users, Registered Users 2 Posts: 4,461 ✭✭✭Bubbaclaus


    EverythingGood wrote: »
    I don't think any of the above is correct. To the best of my knowledge it is only given on your base salary. Check with revenue or a tax expert to be 00% sure.

    https://www.ccpc.ie/consumers/money/pensions/adding-pension-avcs/

    I don't think your HR dept would lie over a matter like this.

    It's not just base salary. Very clear in the tax acts that it is on all earnings up to 115k.


  • #6
    coylemj
    Registered Users, Registered Users 2 Posts: 25,626 ✭✭✭✭coylemj


    EverythingGood wrote: »
    I don't think your HR dept would lie over a matter like this.

    You're excluding laziness and/or incompetence.

    Any actual (base & overtime) or notional income (BIK etc.) can be used. If you're taxed on it, it's taxable income, whether you get it in the monthly payroll or via a benefit like a car or VHI. And the gross amount is what you use to calculate your maximum tax-deductible AVC contribution. Subject to an overall cap of 115K.

    But the OP's payroll system may not have the ability to deduct a given % of overtime or bonuses or BIK for the AVC so he/she may have to make a manual contribution, something you can do up to the end of October for the previous calendar year.

    So if the OP isn't happy that they used the full AVC allowance for 2017, they have until Oct 31st, 2018 to make up the difference. What you do is calculate the gross amount you'd like to contribute, then send a cheque/draft for that amount to the AVC fund, stating that it is in respect of the calendar/tax year 2017 and get a receipt. Then submit a tax return for 2017 and you'll get 40% of the money back.


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  • #7
    Heres Johnny
    Closed Accounts Posts: 2,738 ✭✭✭Heres Johnny


    HR departments are not tax or pensions experts. They're not qualified to give advice unless they have passed APA exam in the product and in regulations. They will point you towards the advisor/provider but no more. They're not lying but they're probably just not experts.

    They've enough to be doing!!


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