Question:
How is tax calculated if beneficiaries to a living annuity opt to take lump sums after the death of the annuitant?
Answer:
Philip, The total lump sums paid out in this way are taxed as one lump sum, as though this had been received by the deceased, ie per the retirement lump sum tax table. The retirement lump sum tax table provides as follows: the first R500 000 is not taxed, the balance to R700 000 is taxed at 18%, the balance to R1 050 000 at 27% and any amounts above that at 36%. This table is applied to the aggregate of retirement fund lump sum benefits received by the deceased since 1 March 2009. The tax calculated in this way that relates to previous lump sums is deducted from the total tax payable to arrive at the tax payable on the current lump sum.
