[READER QUESTION] 'I retired and commuted part of my pension ... now the first R550 000 is taxed at 0%. Does the one-third lump sum increasing to R550k mean I can draw another R50k tax-free?' Michael Haldane of GlobalLocal responds. Moneyweb Tax
I retired and commuted part of my pension, taking a tax break on the lifetime lump-sum tables. The first R500 000 was taxed at 0%, and so on. But in the 2023 budget, the finance minister changed those limits – now the first R550 000 is taxed at 0%.
Michael Haldane Profile Mail As per our understanding, you may get the R50 000 cash lump sum tax-free since the tax-free portion is an accumulative total over your lifetime. Since you have already withdrawn R500 000 as a lump sum from your retirement fund before 1 March 2023, the next time you retire from a retirement fund, your benefit will be taxed according to the new tax tables, therefore you may receive the R50 000 tax-free portion.
Before the 1 March 2023, you were allowed a R500 000 tax-free portion on the cash lump sum. However, the finance minister changed legislation on 1 March 2023, and you are now allowed a R550 000 tax-free portion. If you have withdrawn from any pension fund savings prior to or after retirement, it will reduce the tax-free portion available to you now.It is important to note that the R550 000 tax-free portion is a cumulative total for your lifetime.
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