Severance pay and tax exemption





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Kgaogelo says:
14 October 2020 at 7:52

My severance pay was taxed normal tax after I got retrenched even though my employer informed me that they applied for a tax exemption. Is this correct because I am confused about this? It was the first time an exemption was requested on my behalf and it was the first-time I got retrenched too. The amount of my severance pay was R370 000 and it was taxed normally. What recourse do you perhaps have for me regarding this matter please?

TaxTim TaxTim says:
14 October 2020 at 19:48

The first R500,000 of the severance pay will be tax-free, thereafter it will be taxed according to the special tax tables for retirement lumpsums. So, you should only have been taxed on your severance package if the amount exceeds R500 000. It could be reduced as a result of various retirement fund lump sum benefits or severance benefits having been received in the past, therefore you were taxed on the R370 000.





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