Question:
My wife is resigning from her current company to work elsewhere. Her current provident fund value is a small amount of R25 000. If she takes a pay-out she will be taxed 18% according to the tax table. To avoid being taxed the 18% as she is so close to the R22 500 mark, can she have a portion paid into her retirement annuity tax-free and a portion paid out to her cash?
Answer:
Sean,
Only the amount above R22 500 will be taxed at 18%; the first R22 500 will be paid out tax free (assuming she has not previously withdrawn from a retirement fund). She can transfer the full R25 000 to a retirement annuity and not pay any tax, or just the R2 500 - but she is unlikely to find a RA provider who will accept a once-of premium of only R2 500.
The information and answers supplied in this section do not constitute advice as defined by the Financial Advisory and Intermediary Services Act, 37 of 2002.
