By Liesl Peyper.
The South African Revenue Service (Sars) has received over 1.2 million applications for tax directives for pension fund withdrawals under the two-pot system, with payouts totalling R21.4 billion to date.
In a statement released late on Friday, Sars said of the total of 1 213 646 applications altogether 1 148 729 tax directives were approved for funds to be released.
“The remainder [64 917] were declined for a variety of reasons, including incorrect ID and tax numbers.”
However, Sars has also come across 213 654 individuals who declared incorrect taxable income to get a more favourable tax rate on their withdrawals from the savings pot.
Withdrawals from the savings pot are subject to the marginal tax rate, ranging from 18% to 45% which is far steeper than the former early withdrawal tax rates which were applied before the two-pot regime took effect.
“If a taxpayer understates their income, they are intentionally involved in evading their tax obligation,” says Sars Commissioner Edward Kieswetter.
A penalty will be imposed on taxpayers who have understated income, says Kieswetter, cautioning that such conduct “borders on criminality”.
“There will be consequences for such behaviour,” he declared.
High volumes
The two-pot retirement system came into effect at the beginning of September, whereby pension fund members’ contributions are split into a one third savings pot and a two thirds retirement pot.
Fund members are allowed to withdraw money from their savings pots once every tax year, while the contributions in the retirement pot are preserved.
Administrators of pension funds have been inundated with claims from members to gain access to a portion of their savings with daily volumes exceeding those typically seen during a whole month.
Sanlam for example processed more than 20 000 claims in just the first two working days of September, far exceeding the typical monthly average of 7 000 to 8 000 claims, it said in a statement recently.
The South African Reserve Bank (Sarb) estimates that pension funds will likely see withdrawals totalling R40 billion in the fourth quarter of 2024.
Digital channels get traction
Sars says South Africans who consider withdrawing from their savings pots should use its digital channels, which mean they don’t have to queue or leave their homes and workplaces.
The tax agency’s simulated WhatsApp calculator – to indicate to fund members what amounts they are likely to get as a payout – have been used over 50 000 times since the implementation of the two-pot system.
In addition, Sars’s simulator calculator on its website, has been used close to 656 000 times. Sars also received more than 53 000 queries through its voice channel.
Sars reminds taxpayers who want to apply for a withdrawal to make sure that they verify their tax numbers, have supplied the correct ID numbers and that they do not have any outstanding debt with Sars.
“After a registered taxpayer has applied, a successful tax directive informs the fund management how much tax to deduct from a withdrawal. Directive applications are accepted 24/7 and processed within an hour – 365 days a year from 8:00am to 19:00,” it notes.
Before a claimant receives the money from the savings pot, the fund may deduct outstanding debt on behalf of Sars, unless they have payment arrangements with Sars in place.