Question:
Hi. Three questions. I am a GEPF member. First: If I am to receive about R3 million as a resignation benefit after 20 yrs service, how much tax will I pay? Second: How will the new laws on resignation and benefit payouts by the Minister of Finance affect the payout? Third: If I move the R3 million to a Preservation fund, how much can I withdraw and by how much will the withdrawal be taxed? thank You.
Answer:
Shawn, 1. On R3m you will pay tax of around R927 000 and get out R2.073m), assuming you have not previously withdrawn from a retirement fund. 2. The current retirement reforms passed into law will not affect you - there are NO NEW RULES on withdrawal benefits as yet, as there is no indication when such new laws may come into effect . If laws on compulsory preservation are introduced at a future stage, your vested rights are protected (ie your current benefit will fall under the old rules). 3. You can move the money to an approved preservation fund only. You will be allowed one withdrawal, which can be up to one-third of the balance at the time. If you withdraw the one-third, you must use the entire remaining fund balance to buy an annuity at retirement. The withdrawal will be taxed in the same way as if you withdraw the full amount now, ie per the withdrawal lump sum tax table - the first R25 000 is not taxed, the balance to R660 000 is taxed at 18% and the balance to R990 000 at 27%, Any remainder is taxed at 36%. Your annuity income will be taxed per the income tax tables.
