SARS to introduce retirement fund tax changes in 2022

The South African Revenue Service (SARS) is to introduce changes to its systems from 1 March 2022 to prevent taxpayers who receive income from more than one source, and where one of the sources is income from a retirement fund, ending up with a large tax debt payable to SARS after assessment of their income tax return.

SARS said it was aware that a significant tax debt could arise at year-end when all sources of income are combined to determine taxable income and the tax due. Recently introduced legislation has therefore made 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 will be 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. The rate will then be made available via e@syFile™ to the employer and will only apply to taxpayers who have a form of retirement income.

SARS PAYE system currently 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 but, it said, few taxpayers were making use of this option.

SARS Commissioner Edward Kieswetter said the organisation remained committed to providing clarity and certainty to taxpayers about their legal obligations and always tried to make compliance as easy as possible through system changes such as this.