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PROVIDENT FUND
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PENSION FUND
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RETIREMENT ANNUITY
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RETIREMENT
BENEFIT
No
tax payable on lump sums for individuals with a taxable Income of R46 000 or
less. (With effect from 1 March 2008)
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Cash Lump Sum
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Cash Lump Sum
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Cash Lump Sum
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Entire
amount or surrender value of policy
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1/3
of total value (if 2/3 of the total value of the annuity that is due upon
retirement is less than R50,000, full benefit)
Section 1 “pension fund” (c)(ii)(dd)
Balance used to purchase a comp. annuity taxed i.t.o. tax tables.
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1/3
of total value (if 2/3 of the total value of the annuity that is due upon
retirement is less than R50,000, full benefit)
Section 1 “ RA fund”
(b)(ii) Balance used to purchase a comp. annuity taxed i.t.o. tax tables.
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Tax free portion
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Tax free portion
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Tax free portion
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Z
= C + E – D (Formula B)
Where:
Z
= tax free amount
C
= R300 000 (this limit applies over the tax payers life time and is
applicable in respect of all funds to which the taxpayer belongs).
E
= previous disallowed own contributions, tax free transfers from public
sector funds and divorce order amounts transferred from approved funds.
D
= total previous tax free deductions allowed to the taxpayer in respect of
paragraph 5 of the second schedule.
Second
Schedule
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Z
= C + E – D (Formula B)
Where:
Z
= tax free amount
C
= R300 000 (this limit applies over the tax payers life time and is
applicable in respect of all funds to which the taxpayer belongs).
E
= previous disallowed own contributions, tax free transfers from public
sector funds and divorce order amounts transferred from approved funds.
D
= total previous tax free deductions allowed to the taxpayer in respect of
paragraph 5 of the second schedule.
Second
Schedule
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Z
= C + E – D (Formula B)
Where:
Z
= tax free amount
C
= R300 000 (this limit applies over the tax payers life time and is
applicable in respect of all funds to which the taxpayer belongs).
E
= previous disallowed own contributions, tax free transfers from public
sector funds and divorce order amounts transferred from approved funds.
D
= total previous tax free deductions allowed to the taxpayer in respect of
paragraph 5 of the second schedule.
Second
Schedule
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Tax free portion
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Tax free portion
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Tax free portion
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Taxed
as per table in item 7 of Appendix 1 to the Income Tax Act as follows:
The
first R300 000 of the taxable amount at 18%
The
next R300 000 of the taxable amount at 27% and
The
balance of the taxable amount at 36%
Section
5(2)
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Taxed
as per table in item 7 of Appendix 1 to the Income Tax Act as follows:
The
first R300 000 of the taxable amount at 18%
The
next R300 000 of the taxable amount at 27% and
The
balance of the taxable amount at 36%
Section
5(2)
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Taxed
as per table in item 7 of Appendix 1 to the Income Tax Act as follows:
The
first R300 000 of the taxable amount at 18%
The
next R300 000 of the taxable amount at 27% and
The
balance of the taxable amount at 36%
Section
5(2)
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Retirement
Benefit
(Public
Sector
Funds)
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All
lump sum benefits paid from a public sector fund were all tax-free until 1 March 1998
Thereafter
parity between public and private sector fund taxation. Vested rights are protected by formula C in
the Second Schedule to the Income tax Act.
If a Public Sector fund is involved, the following calculation must be
done:
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All
lump sum benefits paid from a public sector fund were all tax-free until 1 March 1998
Thereafter
parity between public and private sector fund taxation. Vested rights are protected by formula C in
the Second Schedule to the Income tax Act.
If a Public Sector fund is involved, the following calculation must be
done:
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1. Apply formulat C:
A = B x D, where:
C
A
= the taxable portion of the lump sum
to be included in gross income (subject to any further deductions allowed by
paragraphs 5 and 6 of the Second Schedule).
B
= the number of completed years of employment, after 1 March 1998, including
previous or other period of service approved as pensionable service after 1
March 1998
C
= the total number of completed years taken into consideration for the
purpose of determining the amount of benefits payable to the member by the
fund.
D
= the lump-sum benefit
2. Apply formula B: (Z = C + E – D) and the taxable amount is
taxed as per table in item 7 of Appendix 1 to the Income Tax Act.
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1. Apply formulat C:
A = B x D, where:
C
A
= the taxable portion of the lump sum
to be included in gross income (subject to any further deductions allowed by
paragraphs 5 and 6 of the Second Schedule).
B
= the number of completed years of employment, after 1 March 1998, including
previous or other period of service approved as pensionable service after 1
March 1998
C
= the total number of completed years taken into consideration for the
purpose of determining the amount of benefits payable to the member by the
fund.
D
= the lump-sum benefit
2. Apply formula B: (Z = C + E – D) and the taxable amount is
taxed as per table in item 7 of Appendix 1 to the Income Tax Act.
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