The South African Revenue Service says the gross amount of the lump sums applied for in the ‘two pot system’ in the past 10 days totals R4.1bn.
The system came into effect on September 1 and enables people to access a small portion of their retirement savings for emergencies before retiring. The bulk of such savings will remain preserved for retirement.
Between September 1 and 10, Sars received f 161,607 tax directive applications, with 98.9% (159,853) relating to savings withdrawal benefits. This means Sars received an average of 17,964 tax directive applications per day, Sars said in a statement.
Three reasons given by applicants for withdrawals are a transfer due to divorce, a transfer to a retirement fund, and a withdrawal by a taxpayer.
Sars commissioner Edward Kieswetter said contributions made to a pension or retirement fund were not taxed at the time of payment to the fund, but were deferred to the time the person retires, resulting in it being taxed at a reduced rate. “Applicants for tax directives are submitted to Sars by the fund administrator via eFiling. The directive indicates to the fund how much tax should be withheld by the fund on behalf of Sars before payout,” he said.
Kieswetter said taxpayers who owed Sars should realise such debt would be added to the tax on the withdrawal from the savings benefit. “But if there are payment arrangements in place to settle the debt with Sars, this debt will be deducted as per agreement between Sars and the taxpayer. A tax debt that has been deferred will also not be deducted,” he said.