Question:
I went on pension 2009, took a third lumpsum on which at the time R300 000 was tax free. I am now paying out my retirement annuity 1/3 lump sum of R139 829 and the tax directive indicates tax payable at 36%. SARS claims that the wrong form was completed (c) (and the reason) in stead of (e) Momentum claims this not to be true? What is the correct form and reason when taking the lump sum and converting to a living annuity
Answer:
Mr(s) Van Wyk,
We are not sure what forms you are talking about and who should fill these in. But withdrawal from a retirement annuity is always treated as "retirement" unless the holder is emigrating.
Any cash lump sums you take are taxed in aggregate, ie considering all previous lump sums received, irrespective of how they were taxed. So if your one-third lump sum from your pension fund exceeded R1.050m (or R945 000 if you withdraw from the retirement annuity before Feb this year), the your entire retirement annuity cash lump sum will now be taxed at 36%. But if you only took R300,000 as a cash lump sum, and you retired from your retirement annuity after Feb this year, then your total tax-free allowance is R500 000, (of which you already claimed R300,000) which means that the entire R139k lump sum from the retirement annuity should not be taxed.
