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By Samkele Mchunu
As the deadline for withdrawing from the savings pot of the Two-Pot Retirement System approaches on 1 September 2024, individuals must ensure they are registered for tax to avoid rejection of their requests. The South African Revenue Service (SARS) requires registration before applying to relevant funds, emphasizing the importance of tax compliance.
Contributions to retirement funds are not taxed, but withdrawals are subject to tax deductions calculated at individual tax rates. Outstanding returns and debts owed to SARS must be settled before withdrawals can be processed. Fortunately, most applications can be completed on SARS’ digital or mobile channels, eliminating the need for office visits.
To register for tax, pension fund members can utilize the eFiling channel at (link unavailable) or the SARS MobiApp. The SARS Online Query System (SOQS) on the SARS website ((link unavailable)) allows members to register for Personal Income Tax and verify their tax reference number.
Once registered, fund administrators can apply for tax directives, which inform funds of the tax liability. Compliant taxpayers can expect directives within 48 hours. Before payouts, funds will deduct outstanding debts on behalf of SARS.
A tax calculator on eFiling and the SARS website assists members in estimating payouts. Accurate information is essential for clear estimates. For those earning below the tax threshold, tax implications will be finalized during the annual Filing Season, with withdrawals taxed at 18%.
The guiding principle is that all earned or withdrawn amounts determine the final tax rate. Any under or over deductions will be settled during the annual Filing Season. If members choose not to withdraw before retirement, remaining funds will be taxed as a lump sum benefit, typically at lower rates than marginal tax rates applied to pre-retirement withdrawals.
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