Tax changes for pensioners with more than one source of income
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In a statement released this week, the South African Revenue Service (SARS) says it will introduce changes to its systems from March 1 next year to prevent taxpayers who receive income from more than one source – and where one of the sources is a retirement fund – ending up with a large tax bill after assessment of their income tax return.
SARS says it is aware that a significant tax debt can arise at year-end when all sources of income are combined in order to determine taxable income and the tax due.
In response to this, recently introduced legislation makes provision for SARS to determine the effective rate of tax in respect of the combined employment and/or pension sources of income of a taxpayer.
The effective rate of tax is based on the latest data available to SARS and that rate will be provided to the retirement fund administrators for purposes of withholding PAYE based on that data.
This rate is then made available via [email protected]™ to the employer and will only apply to taxpayers who have a form of retirement income.
SARS’S PAYE system allows for a taxpayer to request to be taxed monthly at a higher rate so that any tax due at year-end is adequately covered. However, not many taxpayers who fall into the category are making use of this option, SARS says.
SARS Commissioner Edward Kieswetter says the organisation remains committed to providing clarity and certainty to taxpayers about their legal obligations. He says SARS also strives to make it easy to comply through system changes such as this.