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Lump Sum Retirement Fund deposit no longer accepted under SARS code 4006 in reassessment

Posted 25 November 2015 under Tax Questions


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Mark says:
24 November 2015 at 13:46

Hi. My 2013 tax return was reviewed this tax year and adjustments made by SARS to my Retirement Annuity fund which has now left me owing SARS a large sum of money where the original assessment actually gave me money back. If I compare the original ITA34 to the new one I can see that the previous SARS code 4006 which had an amount counted as part of my deductions now in the new ITA34 reflects as R0.

A bit of background to this is that I changed employees and my new employer did not offer a pension fund so I instead redirected these funds to my retirement fund. It is this lump sum amount that I deposited into my Retirement Fund that I then indicated under SARS code 4006 in my tax return.

This was initially accepted in the original assessment but now in the new assessment shows R0. Why is this?

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TaxTimTaxTim says:
24 November 2015 at 14:12

The initial assessment will reflect whatever you put in whilst the second one will reflect the information after SARS does their audit. Did you withdraw the pension and put it in your bank account and then the RA? Did you pay tax on the withdrawal?


Mark says:
24 November 2015 at 14:39

The whole reason I moved it straight from my pension fund with former employee to my own private Retirement Fund was to avoid any tax on the amount

So no the money never reflected in my bank account. It was transferred directly to my Retirement Fund as a lump sum and has been in there ever since not touched. Nothing has changed since 2013. I continue to pay my monthly contributions to my Retirement Fund. The only difference in 2013 was that I paid this lump sum into my retirement fund and thus indicated this amount in SARS code 4006

For arguments sake lets say I have been putting R4000 a month into my RA since January 2013. Each year that would reflect R4000 X 12 months = R48000 which I would put under SARS code 4006 on my tax return. This is what I did in 2014 and 2015. 2013 however there was a lump sum amount of R500,000.00 so the amount I put in SARS code 4006 for 2013 was R548,000.00 (lump sum deposit plus year contribution)

Was I incorrect in doing this?


Mark says:
24 November 2015 at 14:48

I actually asked on TaxTim about this when I was doing my tax return in 2013:

https://www.taxtim.com/za/blog/how-to-reflect-transfer-of-pension-fund-to-retirement-annuity-on-itr12

And followed the advice given


Mark says:
24 November 2015 at 14:52

What was told would happen in the reply to my original question did. I listed the entire amount and only a portion was assessed and the rest carried forward. This happened for 2013 and 2014 and 2015. But now after the assessment it looks like the are rejecting the lump sum made under SARS code 4006 in 2013 and nothing is being carried forward for 2013, 2014 and 2015. I got new assessment notifications for 2013, 2014 and 2015.


TaxTimTaxTim says:
25 November 2015 at 10:11

So they have reopened the assessment from 2013?


Mark says:
25 November 2015 at 10:22

Yes, they reopened the assessments from 2013 and removed the amount under SARS Code 4006 for Retirement Annuity. It no longer reflects as a deduction amount, now there is R0.

They then reopened 2014 and 2015 assessment to filter through the change to 2013 i.e. not allow the 4006 SARS Code balance to be carried forward.


TaxTimTaxTim says:
25 November 2015 at 12:26

I have seen this before. My once concern is why you were not taxed on the movement initially because you transferred from the Pension Fund to a RA which was not to a Preservation Fund, you should have been taxed on this.

You would need to file an objection with SARS for each year and query this.


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