Defined Benefit and PRSA Query

I

imalwayshappy

Registered User
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Hi All,

A friend has a rental property with a tax liability of €2k for tax year 2021. They are a teacher in the public service and have a defined benefit pension. They are using a popular online tax return service (don't know if I can name it) however they have set up a PRSA pension with Zurich. If they make a contribution of c. 6k to the pension the rental tax liability is offset (via tax relief on the pension contribution).

My question is are they ok to do this with a public sector pension i.e. have a separate PRSA account set up and use the contributions to the pension to offset rental tax liability. They are not breaching any revenue rules etc.

Is there any other negative impacts of a teacher having a PRSA? Will it all be taxed at the end getting the funds out etc.

Thanks
 
The pension tax relief does not affect the tax on the rental income. It reduces the tax on earned income

Yes, all pension income is taxable - a tax-free payment is allowed when you retire but any pension paid after that is taxed
 
The PRSA must be an AVC PRSA linked to their public service employment and not a common or garden PRSA. Their rental income is not in itself allowable for pension contributions but as @jpd has pointed out, if they can claim tax relief on their AVC PRSA against their earned income, it has the same effect.

Regards,

Liam
www.FergA.com
 
Can I ask if all income is taxable ..ie a civil service job and then if any extra income added to that for taxation purposes, then could any expenses which can be claimed / allowable through the extra work, be offset against total taxable income . Ie would that reduce the overall tax bill ?
Thank you .
 
creditworthy said:
Can I ask if all income is taxable ..ie a civil service job and then if any extra income added to that for taxation purposes, then could any expenses which can be claimed / allowable through the extra work, be offset against total taxable income . Ie would that reduce the overall tax bill ?
Thank you .
Click to expand...

I'm not sure I'm reading your question correctly. Please correct me if I'm wrong in any of my assumptions. You have a salary from a civil service job. You also have a separate income from another occupation. We'll refer to that as your self-employed income. Your two sources of income are subject to Income Tax, PRSI and the USC. In effect the two sources are added together. If you have allowable business expenses incurred in the course of carrying out your self-employed work, they can be deducted from your self-employed income before paying tax on it. So yes, such expenses would reduce your tax liability. If you have queries about what expenses are or are not allowable against tax, I'd recommend that you get advice from an accountant. I'm not one.

You don't mention pensions in your question but as this thread is about pensions, I wasn't sure if you were asking about using a pension contribution to offset against your tax liability. You can contribute an AVC (Additional Voluntary Contribution) or AVC PRSA to offset the tax against your Civil Service income, provided that you are within the relevant limits. Alternatively (or additionally), you can set up a separate pension in relation to your self-employed income and claim tax relief on contributions to it. The two must be treated as separate employments for this purpose. There's a ceiling of total income of €115,000. If your Civil Service income is greater that this, your only option is to make additional pension contributions against the Civil Service income.

For pension purposes, the self-employed income must be earned income, as distinct from investment income. Dividends from shares or rent from property are considered investment income.

Regards,

Liam
www.FergA.com
 
"The PRSA must be an AVC PRSA linked to their public service employment and not a common or garden PRSA."
Just wondering how does one go about setting up an avc linked prsa?
Are there any particular steps to ensure prsa avc is linked correctly?
 
Just to add I am wondering about how to do a once off single payment lump sum into psra avc (if possible).
The other thread references monthly premiums-
: thread in public sector pensions

Do any state or semi-state bodies facilitate PRSA income tax relief at source?​

 
Bolter said:
"The PRSA must be an AVC PRSA linked to their public service employment and not a common or garden PRSA."
Just wondering how does one go about setting up an avc linked prsa?
Are there any particular steps to ensure prsa avc is linked correctly?
Click to expand...

An AVC PRSA is similar to a "normal" PRSA but they're different products. So you need to make sure that it's an AVC PRSA you invest in. The application form for an AVC PRSA aks questions about your main pension scheme benefits to make sure that the combination of your main scheme benefits and your AVC PRSA doesn't breach any limits. An AVC PRSA will be set up with the same retirement age as the main scheme and you must take your benefits from both at the same time.
 
Bolter said:
Just to add I am wondering about how to do a once off single payment lump sum into psra avc (if possible).
The other thread references monthly premiums-
: thread in public sector pensions

Do any state or semi-state bodies facilitate PRSA income tax relief at source?​

Click to expand...

Are you thinking about paying a once-off AVC PRSA to offset against 2021 tax year? You'd set up an AVC PRSA and pay the contribution before the deadline date (16th November 2022 if using ROS) and you must also submit your claim to Revenue for the tax relief before the deadline date. You should receive a tax refund before the end of the year, assuming you have no other tax liabilities.
 
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