From our example above you would notice that R17 500 (R100 000 - R82 500) were not allowed for a deduction in the relevant tax year. However, the deductions that were not allowed is carried over to the following tax year and deemed as contributions for that tax year. In other words say for the next tax year your pension contributions were R100 000, your taxable income R300 000 and your remuneration R400 000. Thus your allowed deduction would be R400 000 x % = R110 000. You only contributed R100 000, but now you can also deduct R10 000 of the R17 500 from the previous year, thus a total deduction of R110 000. The remaining R7 500 is now carried over to the following tax year.