Good news for retirees

At retirement one has the option to take a lump sum from retirement funds on a tax-free basis.

Last week the Taxation Laws Amendment Bill was introduced to parliament and we report as follows:

All lump sums taken from retirement funds, be it a pension, provident and retirement annuity will be aggregated and taxed [or not taxed] according to the following formula with effect from 1 October 2007.

• The first R300 000 will be tax free
• The next R300 000 will be taxed at a flat 18%
• The next R300 000 will be taxed at a flat 27%
• Any amount over R900 000 will be taxed at a flat 36%

Note that so far it is still only a Bill, so it is not yet law until it is gazetted. However it can no longer be amended.

So if you are considering retiring, try and delay until after 1 October 2007, especially if you have a provident fund.

Also note that with Pension Funds and Retirement Annuities you can only take a third in cash whereas with a Provident Fund you have access to the entire capital at existing tax laws and the new legislation to be at 1 October 2007.

Ken Silke
E-mail: ken@silke.co.za