Tax Compliance Crucial for Two-Pot Retirement System Withdrawals Starting Sept 2024

SARS has made available a tax calculator on eFiling and its website to help members estimate their payout.

The South African Revenue Service (SARS) has announced that from 1 September 2024, individuals wishing to withdraw from the savings pot of the Two-Pot Retirement System must be registered for tax. SARS emphasized that any withdrawal requests submitted by individuals not registered for tax will be rejected.

Tax Registration: Those not yet registered must complete their tax registration before applying for a withdrawal from their relevant fund. Without a tax registration, the fund’s request for a tax directive will be denied by SARS.

Tax Calculation: Withdrawals will be taxed according to the individual’s applicable tax rate. This includes adding the withdrawal amount to any employment income, which could influence the final tax rate.

Debt Settlements: Any outstanding tax debts owed to SARS will be deducted from the withdrawal amount before it is paid out.

Retirement Fund Taxation: SARS clarified that contributions to retirement funds are tax-free, but withdrawals are taxable. If a member opts not to withdraw before retirement, the remaining funds will be taxed at a generally lower rate when they retire.

Digital Services for Taxpayers: SARS encourages taxpayers to use digital and mobile channels for tax registration and other services to avoid visiting branches. Services include:

eFiling: Registration and tax directive applications can be done via eFiling.

SARS MobiApp: Available for managing tax matters on mobile devices.

SARS Online Query System (SOQS): Available on the SARS website for checking tax reference numbers and other services.

Mobile Channels:

WhatsApp: Save the SARS number 0800 11 7277 and start a query by sending “Hi” or “Hello.”

SMS/USSD: Use SMS number 47277 or USSD code 1347277# for queries.

Tax Compliance: SARS also advises pension fund members to ensure they have no outstanding returns or debts, as these will impact the withdrawal process. Members with debt arrangements will not have their withdrawals affected, but outstanding amounts will be deducted according to those arrangements.

Pension Fund Administrators: Fund administrators are encouraged to conduct trade tests with SARS by 30 August 2024 to ensure a smooth transition once the new system is operational.

SARS has made available a tax calculator on eFiling and its website to help members estimate their payout. This tool requires accurate information to provide a clear estimate.

Overall, SARS is urging compliance with tax registration and proper use of its digital channels to streamline the process for those wishing to make withdrawals under the Two-Pot Retirement System.