Question:
Hi, My dad (63 years old) retired last year to look after my mother who was terminally ill. She passed away earlier this year and my dad is the beneficiary of her provident fund (through her employer). Please can you let me know at what percentage the amount will be taxed? Thank you.
Answer:
Lesley,
If your dad chooses to receive a cash lump sum, this will be taxed as a retirement cash lump sum though it had been received by your late mother on day before her passing. This means the first R315 000 is not taxed, the second R315 000 is taxed at 18%, the third at 27% and the balance above R945 000 at 36%. If your mother previously withdrew from another retirement, any cash lump sum taken then will be taken into account (ie you only receive the tax free/lowly-taxed portions once during a life time). If your dad chooses to receive an annuity, the transfer to the insurance company is tax-free, but he will pay income tax on the annuity income.
Please note that the trustees will allocate your late mother's provident fund proceeds. They have a duty to ensure that all her financial dependents are looked after. Most likely this will be your father, but if there are still minor, or financially-dependent children in the picture, they would also benefit.
