Taxation of lump sums on retirement from retirement funds

Here is the latest issue of Tax Alert which highlights the taxation of lump sums on retirement from retirement funds.

Taxation of lump sums on retirement from retirement funds

Effective Date: 1 October 2007 [Proposed]

What does this mean to you?

In a recent presentation to Parliament, Treasury officials have indicated that, with effect from 1 October 2007, the taxation of lump sum payments from retirement funds will be changed.

In terms of the proposed changes, lump sums paid to individuals on retirement from retirement funds will be taxed as follows:

Amount of lump sum           Tax rate applicable

R0 to R300 000                  0% - tax-free

R300 001 to R600 000             18%

R600 001 & more                  36%

It is important that employees, who are retiring during the current year, consider the impact of these changes on their financial well-being.

Please contact your tax consultant should any of your employees require assistance with evaluating their circumstances.