Pension Withdrawals and Tax Implications from 1 September 2024
From 1 September 2024 individuals intending to withdraw from their Two-Pot Retirement System savings pot can do so. Anyone withdrawing must ensure they are registered for tax. Unregistered individuals must register prior to requesting a withdrawal through their pension fund, as unregistered status will lead to the rejection of tax directive requests by the South African Revenue Service (SARS).
Here's what you need to know about the process and implications:
Members must be registered for tax and ensure all tax returns are filed, and any outstanding tax debts are settled. Debts will be deducted from the withdrawal amount.
Although contributions to retirement funds are tax-free, withdrawals are not. The amount withdrawn will be taxed at the individual’s applicable rate.
Pension fund members can register for Personal Income Tax using the eFiling channel at www.sarsefiling.co.za use SARS MobiApp or the SARS Online Query System (SOQS) on the SARS website (www.sars.gov.za). Pension fund members can also check their tax reference number and apply for tax directives using SARS's eFiling website or mobile apps.
To those who comply, SARS will issue a tax directive within 48 hours from application, instructing the pension fund on the tax amount to be deducted.
Before any final payout, all existing SARS debts will be deducted from the withdrawal amount.
The tax calculator is available on eFiling and the SARS website SARS provides calculators on its platforms to help members estimate potential payouts, which require accurate personal information for precise calculations.
For those below the tax threshold, tax implications of withdrawals will be finalised during the annual Filing Season, with potential tax at 18%.
If members opt not to withdraw from their savings pot until retirement, the amount will be taxed as a lump sum benefit, typically at rates lower than those applied to earlier withdrawals.
For further assistance, members can use SARS's dedicated WhatsApp, SMS, and USSD channels for inquiries or reach out to SARSMedia@sars.gov.za for media-related queries.
For more information refer to the SARS website here.
