Question:
I have resigned at the age of 49 years and my pension fund is worth R105 000. I owe SARS R109 000. I would like to transfer the full amount directly from my employer (current fund) to SARS as payment. Will SARS tax this amount as well (e.g. the first R22 500 tax-free and 18% on the rest)? What do you suggest, as currently interest is being paid to SARS on the outstanding R109 000?
Answer:
Johan,
You will be taxed per the withdrawal lump as tax table, as you indicate. You will not be able to do a direct transfer (set-off), as SARS (or any other creditor for that matter) is not allowed to attach your retirement fund savings. Your fund can only pay the money out to you, so you need to settle with SARS once you have received the money. There may be a slight hiccup, in that your pay-out will be held up if your tax affairs are not up to date. However, if you have acknowledged your debt to SARS, and you are paying interest regularly on the outstanding amount, then this should be sufficient.
