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SARS Tax on Retirement Funds - lumpsum payouts


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#1 ottg

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Posted 02 January 2008 - 11:59 AM

Hi

For those interrested to keep their Pension Funds active in South Africa with the idea to transfer it later.

The proposed admendment of the Tax Bill as part of abolishment of Tax on Retirement Funds suggested the following:

Under the newly created a regime, all retirees will be eligible for tax-free lump
sum treatment of R300 000 (as a life-time tax exempt amount).

In addition to the first R300 000 tax-free lump sum payout
discussed above, the amount from R300 001 through R600 000 will be subject to
a flat 18 per cent rate, and the amount from R600 000 through R900 000 will be
subject to a flat 27 per cent rate. All amounts above R900 000 will be subject to
a flat 36 per cent rate. The payouts received are taxed separately using their
own rate schedule and are thus unaffected by deductions, assessed losses and
annual rebates.

The doc can be seen here:

http://sarsis.onsite...0Memorandum.pdf

In short it implies that you will pay ~17% tax on the first R1m and 36% there after at a flat rate.

Regards

#2 JJV

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Posted 03 January 2008 - 12:32 AM

For those interrested to keep their Pension Funds active in South Africa with the idea to transfer it later.

The proposed admendment of the Tax Bill as part of abolishment of Tax on Retirement Funds suggested the following:

Under the newly created a regime, all retirees will be eligible for ...

Thank you for the update.

Would people who resign from a pension fund be considered "retirees"?
When do you expect these changes to come into effect?

#3 Guest_nc74_*

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Posted 03 January 2008 - 02:35 AM

JJV thats a good question. I was wondering the same thing.

Basically if my OH resigns from his job in a few months time and is only 30 will the same apply to him or will he be taxed the usual amount?

Anyone?

#4 ottg

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Posted 03 January 2008 - 08:57 AM

Hi

The difference between (i) a Pensionfund, Preservation Fund and Annuities and (ii) Things to do when you resign from our current employer, before emigrating, has been explained here:

http://www.saaustral...p?showtopic=797

Retirees are people at the age of 55 which are eligible to retire according to the fund rules.

However, what I am busy researching is the tax implication when you have decided to leave your pension for a period (2 yrs in my case) in RSA, then:

1. Annuities (after age 55)
a. As a Australian citizen all monies in a single lump sum as a foreigner
b. As a South African citizen all monies in a single lump sum
c. Impact if contributions RAs are stopped

2. Preservation Funds (self managed fund)
Here you are allowed to do a single withdrawal. Therefore implication for withdrawal:
2.1 Before age 55
2.2 After age 55
For both cases again: a. As a Australian citizen all monies in a single lump sum as a foreigner b. As a South African citizen all monies in a single lump sum

I have contacted various intitutions and expect initial answers by end Feb 2008.

Will keep you posted!




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