As the South African Revenue Service (SARS) introduces the new two-pot pension system in September, it’s essential for pension fund members and administrators to understand the changes and requirements. The new system is designed to provide more flexibility, allowing individuals to access a portion of their retirement savings while keeping the rest preserved. To ensure a seamless transition, SARS is encouraging administrators to test the system before it officially begins. Here’s what you need to know to be prepared.

Why Testing the System Matters

SARS has emphasized the importance of testing the new system to ensure that everything runs smoothly once it goes live. Administrators have until 30 August to participate in this testing phase. This proactive step is crucial in preventing any potential issues that could arise when the new regulations are enforced.

Registering for Tax: A Must for Pension Withdrawals

Starting in September, pension fund members who intend to withdraw from their retirement savings must ensure they are registered for tax, irrespective of their income level. SARS will deduct tax from any amount withdrawn, based on the individual’s applicable tax rate. This process ensures compliance and that members meet their tax obligations.

Here’s what pension fund members need to do:

1. Apply for a Tax Directive: A tax directive from SARS must be requested for each withdrawal to determine the correct tax rate. If a member is not registered for tax, the request will be denied.
2. Ensure Tax Compliance: Before any funds are released, it is essential that the member’s tax affairs are in order. Administrators have been informed that the process could take up to 21 working days before a withdrawal can occur, highlighting the importance of early compliance.
3. Outstanding Debt: Any existing debt owed to SARS will be deducted from the withdrawal amount. Pension fund members are advised to settle any outstanding tax debts to avoid complications. If a taxpayer has a debt arrangement with SARS, withdrawals will not be affected, but deductions will still occur according to the arrangement.

Understanding Tax Implications for Low-Income Members

For pension fund members earning below the tax threshold, the tax implications will be determined once their annual tax returns are submitted. This process will finalize their tax liability based on their total income, including any pension withdrawals.

• Income Aggregation: The withdrawn amount will be added to the member’s annual salary to determine the overall tax rate.
• Tax Directive: This directive will consider all income earned throughout the year to establish the final tax liability.

Useful Tools and Resources

To assist with tax calculations and compliance, SARS offers several tools:

• Tax Calculator: Available on eFiling and the SARS website, this tool helps pension fund members estimate their post-tax withdrawal amount.
• Registering for Tax: Taxpayers can easily register online through the SARS eFiling website (www.sarsefiling.co.za) or the main SARS website (www.sars.gov.za). There is also an online query system for further assistance.
• Contacting SARS: For quick queries, taxpayers can reach out via WhatsApp at 0800 11 7277 by sending a message starting with “Hi” or “Hello.” Alternatively, they can use the SMS number 47277 or the USSD code 1347277#.

Conclusion

As we approach the implementation of the new two-pot pension system, understanding these tax requirements and ensuring compliance will help you navigate the changes with ease. For more information or personalized assistance, feel free to reach out to Innofin Financial Solutions. We’re here to help you make informed decisions about your financial future.

Sourced from Netwerk24