Summary Retirement benefits

© Warona Lekoko, 2024




RLB & SB RLWB Other
Remuneration
① ② ③
Gross Income XXX XXX XXX XXX
Less: Exempt Income (XXX)
Equals: Income (as defined in S1) XXX XXX XXX XXX
Less: Deductions & capital allowances (XXX)
Less Assessed loss (XXX)
Add: Other amounts included in taxable income XXX
= Subtotal 1 XXXX
Add: Taxable capital gain XXX
= Subtotal 2 XXXX
Less: Fund contributions (XXX)
= Subtotal 3 XXXX
Less Donations (s18A) (XXX)
Equals: TAXABLE INCOME XXX XXX XXX



Normal tax on taxable income XXX XXX XXX
Less: Annual rebates (XXX)
XXX
= Subtotal 4 XXX XXX
(Ltd to nil)


Subtotal of all columns XXXX
Less: s6A & 6B medical fees credit (XXXX)
Equals: Net normal tax liability for the year A XXXX
Less: PAYE and provisional tax (XXXX)
Equals: NORMAL TAX DUE BY OR TO THE TAXPAYER XXXX



Withholding tax on dividends (s64EA(a)) B ZZZ
Donations tax payable C ZZZ
TOTAL TAX PAYABLE BY A NATURAL PERSON (A + B + C) ZZZZ

, © Warona Lekoko, 2024


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▪ Any foreign pension, annuity or lump sum
▪ Received by SA resident: Remember that residents are taxed on worldwide
 Social security from another country; or income, and so and amount received in respect of a
 Pension received from source outside SA i.r.o. past employment outside SA foreign pension must be included in income and
o RAF exempt under s10(1)(gC)
o PF, PPF
o PrF, PrPF
▪ Amounts received from SA source DON’T qualify for exemption
▪ In the case of amount includes services rendered both SA and foreign:

𝐩𝐞𝐫𝐢𝐨𝐝 𝐬𝐞𝐫𝐯𝐢𝐜𝐞𝐬 𝐫𝐞𝐧𝐝𝐞𝐫𝐞𝐝 𝐨𝐮𝐭𝐬𝐢𝐝𝐞 𝐒𝐀
𝐄𝐱𝐞𝐦𝐩𝐭 𝐚𝐦𝐨𝐮𝐧𝐭 = 𝐭𝐨𝐭𝐚𝐥 𝐚𝐦𝐨𝐮𝐧𝐭 𝐫𝐞𝐜𝐞𝐢𝐯𝐞𝐝/𝐚𝐜𝐜𝐫𝐮𝐞𝐝 ×
𝐭𝐨𝐭𝐚𝐥 𝐩𝐞𝐫𝐢𝐨𝐝 𝐬𝐞𝐫𝐯𝐢𝐜𝐞𝐬 𝐫𝐞𝐧𝐝𝐞𝐫𝐞𝐝




GROSS INCOME
AMOUNT APPLICABLE TAX NORMAL TAX PAYABLE
INCLUSION
Lumpsum from ER Individual tax tables
Par (d)(i) – (iii) or (f) of GInc def
Gross amount
Severance benefit
Par (d)(i) or (f) of GInc def
SB and RLB table
RLB from fund
Par (e) of Ginc and par 2(1)(a)(i)–(iii), Cumulative principle
2(1)(c) of 2nd Sch Taxable amount
RLWB from fund (Gross – 2nd Schedule deductions)
Par (e) of Ginc and par 2(1)(b)(iA), (iB), RLWB table
(ii) of 2nd Sch




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▪ Annuity split between income portion (taxable) and capital portion
(exempt)
Received/accrued (R/A): ▪ Purchaser: natural person/estate or trust (created solely for benefit)
✓ annuity ▪ Bought from insurers for a lump sum cash
✓ “living annuity’ ▪ Ensures capital payment made by investor when purchasing life
✓ “annuity amount’ defined s10A(1) annuity product not subject to normal tax when paid back to investor
▪ Annuities payable under following DON’T qualify for exemption:
- Retirement annuity funds not bought from insurer
KBI en’n ander v Hogan – Characteristics: - Pension (or preservation)
▪ Annual Payment - Provident (or preservation)
▪ Repetitive - Inherited/donated annuities
▪ Chargeable against a person - Annuities for services rendered
- Granted as consideration for disposal of business
Arise from:
- Bought from insurance company
- Donation/bequest , through trust/otherwise
- Consideration for sale of business/asset or surrender of right
–
Doesn’t constitute as annuity:
 Instalment or discretionary payments
See later…
 Terminable amounts
 Amounts received from employer-owned policies of insurance




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• Former employees that retired due to old age, ill health/ infirmity, OR
• Former partners of taxpayer: … OR
 Retired due to old age, ill-health or infirmity, AND
 Was a partner for at least 5 years, AND
 Amount paid = reasonable (when compared to services
rendered by the partner before retirement & to profits of
partnership), AND
 Doesn’t represent consideration payable to them for their
interest in the partnership,
• Paid to dependants/nominees of a former employee/partner reliant on
maintenance of former employee/partner