Question:
Hi, thanks for your help. The other thing I want to know is, say I withdraw the 17.5%, do I pay tax on the amount? If so, how much? Thanks for your help so far.
Answer:
Marius,
Your annuity income is always subject to tax. If you are drawing R5 000 per month, then your annual income of R60,000 attracts tax at 18%. However, because of the rebate (R12 080 for individuals under 65, R18 830 for over 65's), you effectively fall under the tax threshold and pay no tax.
If you withdraw at the maximum level of 17.5% pa, your income may exceed the tax threshold and you may then incur some tax. You should consult the income tax tables to see how much tax you would pay, depending on your age and your annual annuity income. If you are under 65, your tax threshold is R67 111 pa (around R5 600 pm) and if you are over 65, then it is R104 611 (around R8 700 pm). Note that the tax tables change every year.
