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Severance payment

Posted 27 July 2015

Jabu says:
27 July 2015 at 8:53

What are the tax implications for compensation resulting from unfair dismissal by an employer?

TaxTim TaxTim says:
27 July 2015 at 17:23

Voluntary severance pay will be taxed normally as it is part of your income from employment. The source code used would be 3901 and taxed as per the normal tax tables. Your employer could apply for a directive from SARS requesting a specific rate of tax to be used given that the full amount plus salary will push you up a tax bracket. However when you file your tax return you will then receive a refund of the additional amount.

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