
Top stories






More news











Marketing & Media
Chicken Licken bravely debones a rare phobia with their latest campaign
Joe Public 2 days



Taxpayers with pre-tax retirement savings may be vulnerable for two reasons.
1. The below table shows the top marginal tax rates for retirement lumpsum withdrawal and personal income tax.
Tax period | Retirement Tax top rate | Personal Income Tax top rate |
2013/2014 | 36% of taxable income above R900,000 | 40% of taxable income above R638,600 |
2014/2015 | 36% of taxable income above R900,000 | 40% of taxable income above R673,100 |
2015/2016 | 36% of taxable income above R1,050,000 | 41% of taxable income above R701,300 |
2016/2017 | 36% of taxable income above R1,050,000 | 41% of taxable income above R701,300 |
2017/2018 | 36% of taxable income above R1,050,000 | 45% of taxable income above R1,500,000 |
The comparison speaks for itself. Where the differential in 2013/14 was only 4%, it now stands at 9%. During the past years, the top personal income tax bracket more than doubled, from R638,600 to R1,500,000. Conversely, the top retirement tax bracket only moved 16.67% (from R900,000 to R1,050,00). These signal strong markers.
2. National Treasury confirmed during the August 2017 Parliamentary sessions, that the retirement tax reform, previously postponed, takes full effect 01 March 2018. This means one thing – compulsory preservation on retirement funding not previously accrued. The policy direction is clear. The fiscus, arguably correct for those vulnerable to premature retirement withdrawal, does not want encashment of retirement savings. An increase in tax rate will be consistent with this policy direction, thus making the encashment decision expensive.
The difficult position for taxpayers, and their financial advisors, is not having the benefit of hindsight. Whilst it would almost always be a bad idea to leave employment just to access retirement funding, the following options ca should be given careful thought:
We have often seen the logic to rather suffer a tax now, than being vulnerable to future adjustments. Coupled with a possible future economic downgrade, the Rand will probably not strengthen. These are uncertain times from a tax policy perspective and we only hope that the PFC makes good decisions for all South Africans.