--- title: "Turning property proceeds into a tax-efficient retirement income" description: "You can never escape the taxman entirely, but you can use clever investment strategies to avoid your estate owing big chunks of money." type: "NewsArticle" publisher: "Daily Maverick" site: "https://www.dailymaverick.co.za" section: "FINANCIAL WELLNESS COACH" author: "Kenny Meiring" author_url: "https://www.dailymaverick.co.za/author/kenny-meiring/" canonical_url: "https://www.dailymaverick.co.za/article/2026-08-17-turning-property-proceeds-into-a-tax-efficient-retirement-income/" published: "2026-08-17T09:02:08" lang: "en-ZA" word_count: 661 --- # Turning property proceeds into a tax-efficient retirement income > You can never escape the taxman entirely, but you can use clever investment strategies to avoid your estate owing big chunks of money. By Kenny Meiring · Published 17 August 2026, 11:02 SAST ## Key points - Sold a property for R10m? You can invest proceeds in a retirement annuity — but only 27.5% of taxable income (max R430,000/yr) is immediately deductible; any excess becomes a “disallowed” contribution and is carried forward. - Use a “one‑day RA” (retire immediately and convert to a living annuity) and section 10C lets you receive annuity income tax‑free to the extent of those unused disallowed contributions — tax applies again once they’re exhausted. - Money inside the living annuity grows free of normal tax; if beneficiaries elect to receive an annuity (or you nominate beneficiaries) you can avoid estate duty and executor’s fees — estimated savings on R10m: ~R2m (estate duty) and ~R400k (executor’s). - Important caveats: keep cash aside for capital gains tax and an emergency fund, ensure you truly need long‑term retirement income, and get a qualified adviser to run cash‑flow, tax and estate modelling before you act. ## Content **Question** I own several rental properties, so my estate is quite large. I recently sold a property for R10-million and would like to invest the money to supplement my pension in a tax-efficient way. I would like to reduce the estate duty and executor’s fees that my family may face one day. I have heard that I can invest the money in a disallowed retirement annuity (RA) and use section 10C to receive a tax-free income. How does this work and what should I be careful of? **Answer** This can be a very effective strategy, but it needs to be understood properly. You get a tax break on your retirement contributions of 27.5% of your taxable income up to a maximum of R430,000 a year. If you contribute more than this, the extra amount cannot be claimed as a tax deduction in that year. This excess is carried forward to subsequent years. These carried-forward amounts are often called disallowed contributions. Let us assume that you contribute the full R10-million to an RA. You will not receive a R10-million tax deduction. Depending on your income and other retirement fund contributions, you may be able to deduct up to R430,000 in the first year. The rest of the contribution is carried forward as a disallowed contribution. This simply means that you have contributed money for which you have not yet received a tax deduction. These contributions can continue to be carried forward and may be used in future years. When you retire from the RA, the money can be used to provide an income through a living annuity. In your instance, where you want to draw an income immediately, you would retire from the RA immediately. (This is often referred to as a “one-day RA”.) Income from a living annuity is normally taxable. However, section 10C recognises that you may have contributed some of the money without receiving a tax deduction. Section 10C therefore allows part of your annuity income to be received tax-free, using the balance of your contributions that have never previously received a tax benefit. The tax-free treatment continues only while you still have unused disallowed contributions available. Once those have been used up, the income will again become taxable in the normal way. So, if you invested your R10-million in a one-day RA and then converted it to a living annuity, the income from this annuity would be tax-free until the disallowed contribution is used up. ### Tax-free investment growth and estate duty savings The investment inside the living annuity does not attract tax on interest, dividends or capital gains in the same way that a normal investment would. A living annuity that is funded by disallowed contributions will not trigger estate duty if the beneficiaries elect to receive the proceeds as an annuity. If they take the proceeds as a lump sum, it will form part of your estate. By using this structure, you could save about R2-million in estate duty on your R10-million investment. If you decide to nominate a beneficiary, no executor’s fees are then payable. This could save you about R400,000 on this R10-million investment. Before investing the proceeds, you should set aside enough accessible money for the capital gains tax arising from the property sale and ensure that you have a well-funded emergency fund. You could consider selling some of the rental properties and following a similar strategy, particularly if the properties are creating a large taxable rental income. Section 10C can be one of the most effective tools available to someone who has substantial capital, sufficient accessible savings and a long-term need for retirement income. However, before investing the property proceeds, speak to a qualified financial adviser who can perform a proper cash-flow, tax and estate analysis for you. **DM** *Kenny Meiring is an independent financial adviser. Contact him on 082 856 0348 or at financialwellnesscoach.co.za. Send your questions to kenny.meiring@sfpadvice.co.za* *This story first appeared in our weekly DM168 newspaper, available countrywide for R35.* ![Image](https://cdn.dailymaverick.co.za/i/pElO80bVzJ2jeRb8Eew-ykRoqEM=/200x100/smart/filters:strip_exif\(\)/file/attachments/2995/DM-310726_276433.jpg)