How do I take advantage of the R500,000 tax free portion AT RETIREMENT? I was retrenched at age 54 and paid full tax on my retrenchment lump sum. Now that I am 56 and would like to retire on the funds in my pension preservation fund, I do not understand why the tax directive on the first R500,000 from my preservation fund was taxed. I have NEVER retired before so I should have the full R500,000 tax free ON RETIREMENT?? Numerous calls to the SARS call centre have me confused between benefits at retirement and tax on retrenchment lump sums (NOT retirement).
When the funds pays you out they will apply for a tax directive and SARS will have to take into account your previous withhdrawal. They will add up all the amounts in total then reduce it by R500 000 then work out the tax and then deduct the tax already paid to arrive at the figure owing.
APsays: 3 October 2015 at 6:13
So - just to confirm - the type of lump sum (ie retrenchment benefit or lump sum from provident fund) makes no difference. They all just get lumped together and I can only get the R500,000 tax free ONCE. Is this correct?
So it is not per type of lump sum and the retrenchment directive & tax will negatively affect me when I retire. (I guess I was hoping that the two events would be treated separately and that I would get R500,000 tax free twice!!)
TaxTimsays: 5 October 2015 at 10:52
No all qualifying lumpsums put together for the purposes of the R500 000 tax free portion unfortunately.
Get SARS Tax Deadlines in your Inbox
We'll tell you when you need to file, along with tax tips and updates.