The widows' salaries are below the tax threshold. However when the spousal pension is added to their income, they qualify for tax and end up owing Sars. (Gallo)
Widows of deceased government employees say the current tax law is making them poorer.
Last week a handful of women dressed in black, from the KwaZulu-Natal-based Women’s Voice organisation, travelled to Parliament.
They have called for a relaxation of the income tax law for widows who work and receive the monthly pensions of their deceased spouses.
The group’s chairperson, Princess Nomthandazo Zubisi, says many widows still work to support their families. But when they receive the monthly pension payouts as well, it takes them up to a higher tax bracket and they are left with less money.
“Some of us are still working, and our salaries are not being taxed because it is below the [tax] threshold. But when you add the spousal pension and add it to our salaries, we end up being over the bracket. And then we end up owing Sars [the South African Revenue Service],” Zubisi said.
The organisation says Sars has even penalised some of their members and has taken money directly from their bank accounts.
“I’m a victim of garnishee orders,” Zubisi says. “Last year March they took R9 000 from my salary. I only earn R15 000 a month. So I’m left with nearly nothing. I pleaded with Sars to reimburse me. Some of us now, they’re not able to survive, because their salaries were docked … Some have even had their houses repossessed.”
Zubisi says many people in this situation want to be legal taxpayers, but simply can’t afford the deductions.
“We are pleading to the government to revisit and amend the tax Act, which causes us to suffer. If we owe Sars, then they dock our salaries. They take investments. When we expect to receive it [salary], then we see it’s gone,” Zubisi said.
Jean du Toit, a tax practitioner at Tax Consulting South Africa, says people need to check which tax bracket they fall into before accepting any additional income into their bank accounts.
“In most cases, pensions are paid out as an annuity. So it’s important to remember the amount that is paid to these widows is paid at the marginal rate, so these pensions effectively increase their income they are already receiving. That will affect the tax they would be paying,” he said.
Du Toit says pension funds should brief widows and beneficiaries about the tax implications of payouts.
“If the pension is paid up in a lump sum, the Act makes provision, your first R500 000 is exempt from tax … If you don’t explain to someone how that would be taxed, they’ll certainly be surprised if they are a layperson and they don’t know how the Income Tax Act is structured. It’s essential to plan ahead, especially for widows, on how they will look out for themselves going forward and how much money they will receive, especially if it’s an annuity,” Du Toit says.
Du Toit says that only a change in the law would solve the widows’ problem. And that could take months, if not years.
“If they want to change that, the Income Tax Act will have to be amended to make specific provision exclusions, if Parliament, as a policy decision, wants to provide relief to widows in such cases,” he said.
There is a glimmer of hope, however. During their visit to Parliament, the group of concerned widows met with the office of deputy finance minister Mondli Gungubele and, separately, with speaker of the National Assembly Baleka Mbete and the National Council of Provinces chairperson, Thandi Modise.
The group says they have assurances from these leaders that their concerns will be addressed.
They were not, however, given time frames for when possible legislative changes to the tax Act may be made.