SA Retirement Reforms and getting your pension money out

[Hugo2]

Hello

there is really now way to extract the RA as a lump sum, tax free from SA.

 

How you invest the net after tax money in Oz, will make the difference and to an extent, "recoup" some of the taxes paid. A financial adviser in oz should guide you. I think Mariette has the necessary Oz registration to assist with Oz investments. If not I can refer your

[Tiermelk]

14 hours ago, Hugo2 said:

there is really now way to extract the RA as a lump sum, tax free from SA.

 

I see the reason is that you received a tax advantage while putting money into the RA for your retirement (ie. you paid less tax up-to a certain amount every year you put money into your RA).  The SA government did/does this to incentivise people to save for their retirement.  Now that you are taking the RA and are not using it to retire in SA you have to pay the tax back. 

 

Great though that you do not have to officially emigrate to get the money out anymore!

[Atjan]

Agreed, good to know that there is less admin to get your money out. 

[Tiermelk]

23 hours ago, Atjan said:

Agreed, good to know that there is less admin to get your money out. 

 

I do not think the life companies are ready for this yet.  I sent Sanlam an email on Thursday last week requesting the paperwork to get this process going, referring them to the amendment,  and they promptly sent me the old paper work which still asked for blocked accounts and formal emigration.  So I am now awaiting their next reply.

[Erik]

31 minutes ago, Tiermelk said:

 

I do not think the life companies are ready for this yet.  I sent Sanlam an email on Thursday last week requesting the paperwork to get this process going, referring them to the amendment,  and they promptly sent me the old paper work which still asked for blocked accounts and formal emigration.  So I am now awaiting their next reply.

Well, let us know what happens, I still have a couple of Rands in RSA that I want out.

[JackoFam]

Yes please keep us posted

[TimeToGo]

What has made this crystal clear for me, as someone pointed out (and put in simple words by @Tiermelk earlier) is that SARS will only allow you to transfer tax free from one RA to another if the RA to which you are transferring is a SARS approved RA.  Obviously an Australian Superannuation fund is not an approved RA fund in the eyes of SARS.  At the age of 53, I am not about to dilute my RA savings further by withdrawing it as cash and pay tax on it.  There has to be a more tax efficient way of doing this.  So, I would advise caution to anyone trying to get RAs out of South Africa.  Find the most tax efficient way to do it!  I'll post further, if I find out anything that may be of help.

[Hugo2]

On 2/20/2016 at 1:15 PM, Tiermelk said:

 

I do not think the life companies are ready for this yet.  I sent Sanlam an email on Thursday last week requesting the paperwork to get this process going, referring them to the amendment,  and they promptly sent me the old paper work which still asked for blocked accounts and formal emigration.  So I am now awaiting their next reply.

 They are 100% correct, the new law is ONLY implemented on 1 March 2016. Best is to sit back and await the implementation

Edited February 23, 2016 by Hugo2

[Hugo2]

On 2/22/2016 at 3:36 AM, TimeToGo said:

There has to be a more tax efficient way of doing this.  So, I would advise caution to anyone trying to get RAs out of South Africa.  Find the most tax efficient way to do it!  I'll post further, if I find out anything that may be of help.

1

It would be interesting to see the outcome of this research. Having been in the industry since 1990, I have yet to find the magic we all would like to discover.

 

May I respectfully suggest to the other readers, that I 100% advise against your approach. albeit that I respect your approach and hunger to find the magic

 

Do NOT transact because of tax or tax alone. There is is several other issues one has to consider.

 

The longer you keep it in SA the bigger the ATO tax claim on the payout, the weaker the Rand. The sooner you cash out, pay SA tax but ensure you invest into an Oz Super, the better you are off on a longer term. I do not sell Super; I do not sell RA's I am a tax and exchange control adviser. I speak from experience gained over 26 years.

To give you this one interesting angle: If you place your RA into a Super and came back to SA, the Super's post-retirement benefit is tax-free in SA and Oz, as the treaty only allows SA to tax and section 9(2)(i) only taxes a super to the extent that you contributed whilst tax resident and physically present in SA.

 

Secondly,  if you retire from the RA, SA will grant you R500k + certain contributions as tax-free. So we all rejoice until ATO taxes the FULL lump sum ignoring the R500k SA exemption as this is not mirrored in ATO law. Once you took the one-third commutation, the annual pension or annuity that follows are tax-free in SA. taxed in Oz. Add the currency risk and 90% of my clients that went this way, in hindsight, being an exact science, regret the decision. Finally, if you convert an old style product into a new era Living annuity, you are trapped into new laws which may restrict your options to extract. The only advantage of a monthly or annual living annuity is that you can take that out of SA Rand, without tax clearance and it is not part of your FIA R10m 

[Tiermelk]

14 hours ago, Hugo2 said:

 They are 100% correct, the new law is ONLY implemented on 1 March 2016. Best is to sit back and await the implementation

 

Bummer - missed that part. Sanlam just came back with this...

 

""As per the new legislation effective 01.03.2015, if you are 55 and your fund values is less than R247 500, you will be able to get proceeds in full (then emigration termination will not be applicable). However, if you want the full proceeds paid out to now- you must have formally emigrated. ""

[TimeToGo]

@Hugo2: I am still looking at various options, a little more out of the box.  In the meantime, I would like to do some calculations of the cash withdrawal amounts and what tax would be deducted.  Who could help with that on a one on one basis?

Many thanks,

John

[Hugo2]

Yes I can, Do note the tax tables iro of lump sum did not change

 

Please send confidential info to my email address hugovz@iafrica.com 

[Sharon]

On 23 February 2016 at 5:00 PM, Hugo2 said:

 They are 100% correct, the new law is ONLY implemented on 1 March 2016. Best is to sit back and await the implementation

Hi Hugo

Is there any update on the new rules for taking out RA's without formally emigrating please. 

 

Thanks

Sharon

 

 

[Biker]

So if I understand this correct, I only need is a tax clearance from SARS?

I have not formally emigrated, but I am no longer a SA citizen. If I get the tax clearance I can submit to financial institution and they pay into my bank account?

Must it be SA account? If so, must it still be managed under reserve bank rules or something as before?

 

And if I read this correct, we don't know how it will be taxed?

[Hugo2]

On 3/13/2016 at 6:56 AM, Biker said:

So if I understand this correct, I only need is a tax clearance from SARS?

 

Must it be SA account? If so, must it still be managed under reserve bank rules or something as before?

 

 

Hi

I do not think the SA tax clearance is the only tax compliance they will require. We have not seen the SARS rules as yet. The process changed not the tax rules ie the amount will be taxed in SA and could be partly taxed by ATO. We also have not seen the SARB rules but all fund managers we have spoken to, refers to a SA Rand account in taxpayer's name. 

[Tiermelk]

On 2/22/2016 at 0:36 PM, TimeToGo said:

https://www.10x.co.za/blog/non-residents-how-to-claim-your-south-african-ra-fund/.

[Tiermelk]

The article shared by TimeToGo has some active responses to questions in the comments, latest 10 March.  Looks like you might have to strong arm the fund managers to get your money. 

 

"  If they refuse to effect the new law, then you can make a written complaint to the fund administrator/fund trustees and if that bears no fruit, you can lodge a formal complaint with the Pension Funds Adjudicator. Note that the normal rules for non-residents will apply, so you do have to have a non-residents bank account. "

[Tiermelk]

On 3/14/2016 at 6:05 PM, Hugo2 said:

Hi

I do not think the SA tax clearance is the only tax compliance they will require. We have not seen the SARS rules as yet. The process changed not the tax rules ie the amount will be taxed in SA and could be partly taxed by ATO. We also have not seen the SARB rules but all fund managers we have spoken to, refers to a SA Rand account in taxpayer's name. 

 

Hugo2, apparently there's been an update on this one?

 

Someone called Julian Haw posted this on one of the Facebook pages (He seem to provide the same service as CashKows). 

 

"Formal emigration still required to access your RA
There was some confusion when the budget amendments were proposed in February. Part was worded so it appeared that you no longer had to emigrate formally to access your retirement annuity. In fact it was presumed you merely had to take residence in another country. SARS did not change their requirements for a blocked account and tax clearance. This anomaly has been cleared up by the “The Taxation Amendment Bill 2016” published on 08,07,2016
06.Inclusion of emigration as a requirement for the withdrawal from retirement annuity funds Contrary to the original policy intention, it is currently possible for a member of a retirement annuity fund to make a full withdrawal from the fund once they cease to be tax resident, without requiring formal emigration as recognized by the SARB. TLAB now seeks to rectify this error by proposing that the definition of retirement annuity fund in the ITA be amended to include the emigration requirement in order for member to withdraw from the retirement annuity fund. In addition, a member who departs from SA at the expiry of a visa and who is not regarded as a resident by the SARB, will be allowed to take a full withdrawal from the fund. The proposed amendments are deemed to have come into effect on 1 March 2016. "

 

Cheers 

[Hugo2]

On 7/19/2016 at 6:58 AM, Tiermelk said:

 

Hugo2, apparently there's been an update on this one?

 

Someone called Julian Haw posted this on one of the Facebook pages (He seem to provide the same service as CashKows). 

 

"Formal emigration still required to access your RA
There was some confusion when the budget amendments were proposed in February. Part was worded so it appeared that you no longer had to emigrate formally to access your retirement annuity. In fact it was presumed you merely had to take residence in another country. SARS did not change their requirements for a blocked account and tax clearance. This anomaly has been cleared up by the “The Taxation Amendment Bill 2016” published on 08,07,2016
06.Inclusion of emigration as a requirement for the withdrawal from retirement annuity funds Contrary to the original policy intention, it is currently possible for a member of a retirement annuity fund to make a full withdrawal from the fund once they cease to be tax resident, without requiring formal emigration as recognized by the SARB. TLAB now seeks to rectify this error by proposing that the definition of retirement annuity fund in the ITA be amended to include the emigration requirement in order for member to withdraw from the retirement annuity fund. In addition, a member who departs from SA at the expiry of a visa and who is not regarded as a resident by the SARB, will be allowed to take a full withdrawal from the fund. The proposed amendments are deemed to have come into effect on 1 March 2016. "

 

Cheers 

 

 

yes they now trying to fix the issue but there is huge resistance. Groups such as Asisa is opposing it, not this is draft law open for comment ie is not even near being passed as law, but the summary above is 100% correct

 

Also note that when we told Treasury and SCOF this, they "scoffed" us off! But SARB is currently not budging they insist on a blocked account

 

[Marcodasilva]

Hi @Hugo2

 

What is the latest on the above issue, i am busy fihgting with old mutual about releasing my RA which is under 100k and they insist i fill out the below. Any advise would be greatly appreciated. 

 

Documents required when emigration is in progress:
- Tax clearance certificate from SARS or IB-IT21
- MP336: (Y/N)
- Letter from Authorised dealer confirming emigration e.g. Std Bank off
shore

[Hugo2]

44 minutes ago, Marcodasilva said:

Hi @Hugo2

 

What is the latest on the above issue, i am busy fihgting with old mutual about releasing my RA which is under 100k and they insist i fill out the below. Any advise would be greatly appreciated. 

 

Documents required when emigration is in progress:
- Tax clearance certificate from SARS or IB-IT21
- MP336: (Y/N)
- Letter from Authorised dealer confirming emigration e.g. Std Bank off
shore

 

 

Hi

the law is in draft but reality is: you have to file for formal emigration, only if you 55 or older and the value is less than circa R250k, can you cash out

[Marcodasilva]

@Hugo2 thanks for the advise

 

In simple terms im screwed as i do not want to formally immigrate this year.

 

So Old Mutual gets to keep their grubby hands on my hard earned cash for another year 

[Hugo2]

7 minutes ago, Marcodasilva said:

So Old Mutual gets to keep their grubby hands on my hard earned cash for another year 

 

 

Marco

and I expect  we will soon be back to old style expensive formal emigration for all - R25K in fees, another R20k or more in tax and very little left in Au$. Sad

[Atjan]

@Marcodasilva

My wife managed to sort out our formal financial emigration as per what was stated in less than 3 months. 

[Tiermelk]

On 9/30/2016 at 10:39 PM, Marcodasilva said:

So Old Mutual gets to keep their grubby hands on my hard earned cash for another year 

 

Have a look at 10x.co.za, I just moved my RA from Sanlam to them.  Their fees are much much less and they offer index based investment options so you`re not paying extra fees to some investment manager as well.