How will my provident fund pay-out be taxed?


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amount above R22 500 will be taxed at 18%; the first R22 500 will be paid out tax free (assuming she has not previously withdrawn from a retirement fund).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.


Get investment and saving tips straight to your inbox.

Related FAQ

How do I top up my TFSA using My10X?

You can make a top-up to your 10X investment on our member portal, My10X. To access My10X visit...

Related FAQ

How do I top up my RA using My10X?

You can make a top-up to your 10X investment on our member portal, My10X. To access My10X visit http...

Calculator

How much do I need?

We can help you plan your future. Use our calculator to see if you are on track for a comfortable retirement.

RA Calculator

Get started or switch to 10X today.