South Africa Retirement Lump Sum & Withdrawal Tax Calculator

About the South Africa Retirement Lump Sum & Withdrawal Tax Calculator

Lump sums from South African pension, provident, preservation and retirement annuity funds are not taxed like salary: SARS has two tables of their own, and each applies to all your lump sums together. A lump sum on retirement, death or leaving work from 55 — and a severance benefit from an employer on retrenchment, from 55 or when illness ends your work — uses the retirement table, whose first R550 000 is tax-free once in your life; cash taken before retirement, on resignation or dismissal, uses the withdrawal table, tax-free only up to R27 500 (SARS).

The calculator applies the right table to this lump sum plus every earlier one and subtracts the tax on the earlier ones, as SARS does, after contributions that were never deducted from your income. A two-pot savings withdrawal is different: it is taxed at your marginal rate with your other income, so choose that type and enter your income for the year. Nothing you type leaves your browser.

Without a pass, the free preview shows the tax on the lump sum or withdrawal in full, with the first rows of the working and of the band table; a Pro pass unlocks every figure, what is paid out, the whole working, the summary to copy and the CSV.

The retirement table

For retirement fund lump sums on retirement, death or leaving employment at 55 or older, through sickness, accident, injury, incapacity or redundancy or because the employer’s trade ended, and for severance benefits from employers (SARS):

• Up to R550 000: no tax
• R550 001 – R770 000: 18% of the amount above R550 000
• R770 001 – R1 155 000: R39 600 + 27% of the amount above R770 000
• R1 155 001 and above: R143 550 + 36% of the amount above R1 155 000

A severance benefit is what an employer pays for the loss of a job when you are 55 or older, illness or injury ends your work for good, or you are retrenched or the employer stops trading, unless you held more than 5% of the company. Other exit payments, notice pay and leave pay are taxed with your salary (SARS employer guide).

The withdrawal table

For cash from a pension, provident, preservation or retirement annuity fund before retirement, including a share assigned to a former spouse under a divorce order (SARS):

• Up to R27 500: no tax
• R27 501 – R726 000: 18% of the amount above R27 500
• R726 001 – R1 089 000: R125 730 + 27% of the amount above R726 000
• R1 089 001 and above: R223 740 + 36% of the amount above R1 089 000

Transferring the benefit to a preservation fund or a retirement annuity instead is tax neutral (SARS directive guide).

Why earlier lump sums matter

The tax on a lump sum is the table applied to it plus all your earlier ones — retirement lump sums from 1 October 2007, withdrawal benefits from 1 March 2009 and severance benefits from 1 March 2011 — less the table applied to the earlier ones alone. A withdrawal at 35 therefore uses up part of the tax-free amount you would otherwise get at retirement, and a second lump sum is taxed from the band the first one ended in.

Two-pot savings withdrawals

Withdrawals from the savings component are taxed at your marginal income tax rate, not by the lump sum tables: SARS issues the fund a directive from your estimated income, and any difference is settled on your assessment (SARS Budget FAQs). You can withdraw once a tax year from a pension or provident fund, and once a tax year per policy from preservation funds and retirement annuities (SARS directive guide), and SARS first takes any tax debt you owe from the payout (SARS). You must be registered for tax and have no returns outstanding.

Contributions that were never deducted

Contributions above the yearly deduction limit carry forward. When a fund pays a lump sum, SARS deducts that amount from it before applying the table, so you are not taxed on money that was taxed when you earned it (SARS directive guide). For your other income tax, use the income tax calculator.

Limitations

• The fund applies for a tax directive and SARS’s directive decides the tax actually withheld; this is an estimate of it.
• Earlier lump sums are entered as one total of their taxable amounts; your IRP5 certificates and directives show them.
• Annuities bought with the rest of a retirement benefit are taxed as income when paid, not here.
• Lump sums from foreign funds, unclaimed benefits and other special cases follow other rules.
• For a two-pot withdrawal the tax is the extra income tax after the age rebates; medical tax credits your other tax leaves unused could absorb part of it on assessment.

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