Scribd Logo
Upload

Welcome to Scribd!

  • 9 views

    Retirement Benefits - 2023

    Uploaded by

    Given Refilwe
    1) Belinda received a lump sum of R500 000 from her retirement annuity fund after retiring. This lump sum will be taxed using the lump sum tax tables and no tax will be payable as the first R500 000 is tax free. 2) Remember received a retrenchment package of R150 000 from his employer. This will qualify as a severance benefit and be taxed using the severance benefit tax tables. 3) Kgothatso received lump sums of R1 500 000 and R500 000. The R1 500 000 will be taxed as a severance benefit and the R500 000 using the lump sum tax tables, resulting in total tax payable of R

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Retirement Benefits - 2023

    Uploaded by

    Given Refilwe
    9 views6 pages
    1) Belinda received a lump sum of R500 000 from her retirement annuity fund after retiring. This lump sum will be taxed using the lump sum tax tables and no tax will be payable as the first R500 000 is tax free. 2) Remember received a retrenchment package of R150 000 from his employer. This will qualify as a severance benefit and be taxed using the severance benefit tax tables. 3) Kgothatso received lump sums of R1 500 000 and R500 000. The R1 500 000 will be taxed as a severance benefit and the R500 000 using the lump sum tax tables, resulting in total tax payable of R

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    1) Belinda received a lump sum of R500 000 from her retirement annuity fund after retiring. This lump sum will be taxed using the lump sum tax tables and no tax will be payable as the first R500 000 is tax free. 2) Remember received a retrenchment package of R150 000 from his employer. This will qualify as a severance benefit and be taxed using the severance benefit tax tables. 3) Kgothatso received lump sums of R1 500 000 and R500 000. The R1 500 000 will be taxed as a severance benefit and the R500 000 using the lump sum tax tables, resulting in total tax payable of R

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    9 views6 pages

    Retirement Benefits - 2023

    Uploaded by

    Given Refilwe
    1) Belinda received a lump sum of R500 000 from her retirement annuity fund after retiring. This lump sum will be taxed using the lump sum tax tables and no tax will be payable as the first R500 000 is tax free. 2) Remember received a retrenchment package of R150 000 from his employer. This will qualify as a severance benefit and be taxed using the severance benefit tax tables. 3) Kgothatso received lump sums of R1 500 000 and R500 000. The R1 500 000 will be taxed as a severance benefit and the R500 000 using the lump sum tax tables, resulting in total tax payable of R

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 6

    Question Bank

    2023

    Retirement Benefit
    Question 1
    You have been provided with two queries relating to two taxpayers who are South
    African tax residents relating to their 2023 year of assessment as follows:

    Resident 1: Belinda Sebake


    Belinda Sebake retired on 30 June 2022 and received a lump sum of R500 000 from
    her Retirement Annuity Fund on 15 July 2022. No Pension Fund and Retirement
    Annuity Fund contributions were brought forward from the prior year of assessment
    and all current year contributions to retirement funds were allowed as deductions
    against income tax in terms of section 11F.

    Resident 2: Remember Chauke


    Remember Chauke is a 35 years South African Tax resident who was retrenched by
    his employer in the 2023 year of assessment. The employer is still suffering the effects
    brought about covid-19, although it tried to keep all its employees since 2020 it just
    could not return to its glory days and these prolonged financial difficulties meant that
    the company had to cut down on some costs in order to ensure that it continues
    running. As part of its cost cutting plans, some employees including Remember had to
    be retrenched. He was retrenched on 28 February 2023 and he received a
    retrenchment package (a lump sum) amounting to R150 000.

    YOU ARE REQUIRED TO:


    # MARKS

    1. Discuss the Income Tax implications for the two taxpayers for their 2022 year of 14
    assessment relating to the lump sums they have received.

    Logic and presentation 1

    Question 2
    Kgothatso was 57 years old on the date she resigned; she received the following
    benefits on her resignation:
    1. Kgothatso received a R1 500 000 lump sum from his employer on 31 August 2022.
    2. Kgothatso received a lump sum of R500 000 from the Retirement Annuity Fund and
    monthly annuity of R64 500 from 30 September 2022. She retired from the Retirement
    Annuity Fund on 1 September 2022.

    YOU ARE REQUIRED TO:


    # MARKS

    1. Calculate the tax on the lump sums received by Kgothatso in her 2023 year of 10
    assessment.

    Question 3
    On 30 November 2022, six years before Horton Wood was due to retire from his
    employment by Putt-Tee Golf Accessories Limited, a motor car accident claimed his life.
    For the past seven years he had been its managing director. He was a resident of the
    Republic.

    Under Horton Wood's contract of employment, from the time of his promotion to managing
    director of Putt-Tee Golf Accessories Limited, he enjoyed a monthly salary of R41 700.

    Horton Wood was a member of Putt-Tee Golf Accessories Provident Fund. This fund is
    the only retirement fund that he has been a member of.
    To the time of Horton Wood's death, he had been a member of the fund for 22 years. On
    his death, a lump-sum award of R1 800 000 became payable to his estate. He had
    contributed a total of R390 000 to it during his years of membership, his contributions
    being at the rate of 5% of his gross salary. Up to 29 February 2016 he had contributed
    R296 175 to it.

    The number of years Horton Wood would have served had he reached retirement age
    were taken into account in arriving at the lump-sum award of R1 800 000.

    Horton Wood was 53 years of age when he died, and apart from the amounts as set out
    above, no other amounts were received by him or accrued to him during his 275-day 2023
    period of assessment.

    You are required to determine


    1. The taxable portion of Horton Wood's provident-fund award, and
    2. His South African normal tax liability for his 275-day 2023 period of assessment.
    Solution Bank
    Question 1
    Discuss the Income Tax implications for lump sums
    Belinda: lump sum from retirement funds
    - The lump sum will be included in gross income √
    - However the lump sum be deducted as it will be taxed separately using special tax
    tables √
    - The taxpayer has reached retirement age √
    - Therefore will be taxed according to the retirement fund lump sum benefit tax table √
    - The will no tax payable on this lump sum √ as R500 000 was received and the first
    R500 000 of retirement fund lump sum benefit is tax free √

    Remember: lump sum from ER


    - Lump sums received from ER on termination of service/employment are either taxed in
    full or at special rates in terms of gross income definition √
    - If the lump sum received meets the requirements of a Severance Benefit, the lump will
    be included in gross income (paragraph (d)) but taxed at special rates (severance
    benefit table) √
    - If the lump sum received does not meet the requirements of a Severance Benefit, the
    lump sum will be taxed in full (included in gross income in terms of paragraph (c)) √
    - The lump sum received will meet the requirement of a Severance Benefit √ due to the
    following:

    • He is not 55 years old or older √


    • He has not retired due to ill health, superannuation or an infirmity √
    • Employer did not cease to carry on trading √, they were however retrenched by
    the ER √
    - Therefore the R150 000 lump sum will be included in gross income in terms of
    paragraph (d) √ and taxed using special tax table √
    Available marks: 16
    Maximum marks: 14
    Communication mark: 1
    Question 2

    Tax on lump sums


    1. Severance benefit
    Current lump sum 1 500 000
    Previous lump sums 0
    Aggregate 1 500 000 √
    Tax (1500 000 - 1 050 000)x 36% √ + 130 500 √ 292 500

    2. RAF We use retirement fund lump sum benefits tax


    table
    as she reached retirement age √
    Current lump sum 500 000
    Previous lump sums 1 500 000
    Aggregate 2 000 000 √
    Tax (2 000 000 - 1 050 000) x 36% √ + 130 500 √ 472 500
    Aggregate less current lump 1 500 000
    sums (2 000 000 - 500 000)
    Tax (1500 000 - 1 050 000)x 36% √ + 130 500 √ 292 500
    Tax payable on RAF (472 500 - 292 500) 180 000 √p

    Question 3
    Horton Wood
    Suggested Solution to Part 1
    Lump sum 1 800 000

    Less non-taxable portion – contributions previously not deducted (in the determination of Horton Wood’s
    taxable income) (R390 000 – R18 765 (see below))
    296 175

    Taxable portion 1 503 825


    Suggested Solution to Part 2
    Salary (9 × R41 700) 375 300

    Less contributions to the provident fund of R18 765 (R375 300 × 5%) deductible in the determination of
    Horton Wood’s taxable income under section 11F but limited to the least of

    • R350 000,

    • R375 000, and

    • R103 208 (27,5% of (R375 300) 18 765

    356 535

    Add taxable portion of his lump sum benefit (see above) 1 503 825
    Taxable income 1 860 360

    Less retirement fund lump-sum ‘retirement’ benefit 1 503 825

    Taxable income excluding retirement fund lump-sum ‘retirement’ benefit 356 535

    Schedule tax payable on a taxable income of R356 535

    – On R353 100 73 726,00

    – On R3 435 at 31% 1 064,85

    Normal tax payable (section 5) 74 790,85

    Less rebate:

    – Primary (section 6) for 275 days (R16 425 × 275 / 365) 12 375,00

    Normal tax liability excluding retirement fund lump-sum ‘retirement’ benefit 62 415,85
    Add normal tax on retirement fund lump-sum ‘retirement’ benefit of R1 503 825

    – On R1 050 000 130 500,00

    – On R453 825 at 36% 163 377,00 293 877,00

    Normal tax liability 356 292,85

    You might also like