Have you found yourself with a huge tax bill at the end of the tax year, and no money to pay it? SARS is making your life easier by changing the way it does tax deductions on your retirement fund from 1 March 2022.
You may receive several annuities or pensions from your previous employer or pension fund. In the past, your fund used to look at each income source separately when working out your tax.
The separate amounts you received probably fell below the tax threshold and therefore you paid no PAYE on your pension or annuities during the year. The problem came in however, when these different income sources were added together at the end of the tax year to determine what you owe SARS. It often happened that in total you’ve earned more than the tax-free threshold and you owe money to SARS. You can read more about this here.
With the recent change, SARS is now able to use data that take all your income sources into account, to determine a more accurate monthly tax deduction. If your retirement fund administrator deducts an accurate amount of PAYE from your pension or annuity every month, you shouldn’t be faced with tax debt at the end of the tax year.
You won’t have to do anything, as SARS will provide your retirement fund administrator with the PAYE deduction percentage. This rate will apply for the whole tax year unless the circumstances influencing your tax liability should change. Your fund administrator could revert to applying the normal PAYE deduction rate, from the month in which they become aware of the change in circumstances.
Your monthly tax deduction could be higher, but you’ll avoid a nasty tax bill at the end of the tax year.
Your fund administrator can continue deducting PAYE at a higher rate than the SARS rate if you ask them to do this. They can also continue using the normal tax deduction rate, but you could then get an unpleasant surprise at the end of the tax year.
If you want to put your mind at ease, you can talk to your retirement fund administrator about the coming changes. They have been informed and they’re prepared to deal with them.