Question:
I am 54 years old and intend only to retire at the age of 65. i intend to withdraw half of my pension and transfer half of the pension to the presevation fund. What will the tax implication be. Will they tax me on only the half that has been withdrawn. Or how will they calculate the tax-deductible amount at retirement
Answer:
Ansie, You will be taxed per the withdrawal lump sum tax table on the half you withdraw. The first R25 000 is not taxed, the balance to R660 000 is taxed at 18%, the balance to R990 000 at 27% and the remainder at 36%. This table is applied to the aggregate of your retirement fund withdrawals, ie you only receive the tax-free amount of R25 000 once. At retirement, if you again take a lump sum, the lump sum you withdraw now will be considered in applying 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%. What does this mean? Say, you withdraw R500 000 now. You will pay tax of R85 500 (R475 000 x 18%). At retirement, you draw another R500 000. The retirement tax table kicks in at the R500 000 level, so you will pay tax of R117 000 (R200 000 x 18% plus R300 000 x 27%).
