If you?ve been retrenched, or fear you might be, the following articles might also be of interest:

Question:
I'm taking a voluntary retrenchment package and would like to know how much tax they will deduct if I take my pension money.

Do I qualify for the R300 000 tax free portion?

I?m 42 years old and currently earn R19 500 (cost to company).Would you please work out the tax on my pension of R700 000?

Answer:
Taxation of Retirement Fund lump sums has seen its fair share of changes, proposals and amendments of late. The Revenue Laws Amendment Act in January ushered in the first of the changes and was closely followed by The Taxation Laws Amendment Act 17 of 2009, which became law on 30 September 2009.

This brought about some new changes that include revised tables for taxation and despite this seeming confusion, the legislation has allowed for far easier calculation methods in the form of tax tables.

The two tables (see below) are broken into a withdrawal table for 'voluntary' termination such as resignation and the other utilised in the case of death or retirement (and now involuntary retrenchment).

This highlights one of the most notable changes seen in the recent amendments, namely that now the law differentiates between voluntary and involuntary retrenchment where members stand to be taxed in a more favourable manner. Given that you have opted for a voluntary retrenchment, the withdrawal table would be used.

Withdrawal tax table

  • Less than R22 500 ? 0 percent

  • R22 500 to R600 000 ? R0 + 18 percent on amount exceeding R22 500

  • R600 001 to R900 000 ? R103 950 + 27 percent of amount exceeding R600 000

  • R900 001 plus ? R184 950 + 36 percent of amount exceeding R900 000

In theory this is an easy equation, however, it would seem that the SARS systems have not yet catered for this change. In light of this, the status quo regarding current practice is that SARS will include the R22 500 tax free amount and utilise the old average rate of tax for the taxable portion.

In an interim attempt to lessen the impact of this, the 2010 tax year assessment will consider this withdrawal and depending on the taxation difference between the old and new system, you may find yourself with either a tax refund or tax due.

For the benefit of other readers (and more specifically those who are facing an inevitable involuntary retrenchment), the table below would apply. For retirees or deceased estates, it is important to note that the only change is that the R300 000 amount has now been included in the table with the old formula B falling away.

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