Tax on R2.59m provident fund withdrawal
25 March 2014
Posted by: Author: Fin24
A Fin24 user is seeking tax advice after terminating her employment. She writes:
I have just resigned from my employer. What will be the tax implications on my full withdrawal of R2 590 000 from the provident fund.
Soré Cloete, senior legal advisor at Old Mutual, responds:
When you resign from your employment, you will be withdrawing from your provident fund. If you take the full amount in cash (and assuming you have not made contributions to your provident fund and have not received any benefits from a retirement before), the tax will be calculated as follows on the full fund value of R2 590 000:
= R203 400 + 36% (R2 590 000 - R990 000)
= R779 400
Should you transfer your fund value to a provident preservation fund, the transfer to the preservation fund will not attract income tax.
You will be allowed one taxable withdrawal prior to retirement from the preservation fund and such withdrawal will be taxed as a withdrawal, according to the following table:
Upon retirement from the preservation fund, the following table will be applied to calculate tax payable.
The above tables are applicable from March 1 2014. The above answer is based on the information provided and it would be advisable to seek the advice of a professional financial planner registered with the FSB to look at your specific circumstances and options.
This article first appeared on fin24.com.