(Delwyn Verasamy/M&G)
The total gross lump sum paid out in two-pot withdrawals to date is R21.4 billion, the South African Revenue Service (Sars) said on Friday. The amount has increased significantly from the R4 billion announced on 11 September.
Sars said it received 1.2 million applications for tax directives for withdrawals from the savings withdrawal benefit of the two-pot system. But only 1.1 million tax directives were approved for funds to be released.
The decline was for a variety of reasons, including incorrect identity and tax numbers being submitted.
The two-pot system, which commenced on 1 September, is a system where all the future contributions of pension and retirement fund members will be split into two pots: a savings pot and a retirement pot.
The system came into effect after President Cyril Ramaphosa signed into law the Revenue Bills Amendment Act on 1 June. The Act established a system that gives members of retirement funds access to savings in case of emergency, while ensuring that they preserve the majority of the money for retirement.
Ramaphosa said the amendment was to address concerns related to the lack of preservation before retirement and to assist households in financial distress.
The process for the two-pot savings withdrawal according to Sars is that after a registered taxpayer has applied, a successful tax directive informs the retirement fund management how much tax to deduct from a withdrawal.
Before a final amount is paid to the applicant, the retirement fund will be informed to also deduct any outstanding debt on behalf of Sars before any payout is made to the member.
If a person has a debt arrangement with Sars, the withdrawal will not be affected. If there is a debt owed to Sars, it will be deducted.
The Mail & Guardian previously reported that retirement and pension fund members are using the money to pay off debt and alleviate financial distress.
Sars commissioner Edward Kieswetter said he is concerned about people who declare the incorrect income to have a favourable tax rate.
Tax is imposed on a withdrawal at a marginal tax rate ranging from 18% to 45% depending on retirement fund member’s pay scales.
“Sars is deeply concerned that 213,654 taxpayers have been identified where they have declared incorrect taxable income. If a taxpayer understates their income, they are intentionally involved in evading their tax obligation.
“A penalty will be imposed on taxpayers who have understated income. Finally, I wish to caution taxpayers to refrain from this conduct that borders on criminality as there are real consequences for this behaviour,” Kieswetter said.