Tax deductions (PAYE) on pension or annuity
To assist pensioners with more than one source of income, legislation (recently introduced) makes provision for SARS to determine a more accurate PAYE deduction. By using the latest data available to SARS, SARS will notify the retirement fund administrators who will then deduct a more accurate amount of PAYE from the pensions or annuities.
In practice, this will mean the following:
- Pensioners will not have to do anything, because SARS will provide the retirement fund administrator with the new PAYE deduction percentage.
- For pensions or annuities payable during March 2022 and for periods thereafter, the retirement fund administrators will use the new rate to deduct PAYE from the pensions or annuities.
- The new rate provided by SARS will be valid for the whole tax year unless circumstances that influence your year-end tax liability change. In such a case, the retirement fund administrator may revert to applying the normal PAYE deduction rate, with effect from the month in which it became aware of the change in circumstance.
- The PAYE deducted from the pensioners pension or annuity may be slightly higher, but in return, such a pensioner will not be faced with an unexpected tax bill at the end of the tax year.
- Pensioners may request the relevant retirement fund administrator, or continue with the arrangement, to deduct PAYE at a higher rate than the rate provided by SARS.
- It seems that Pensioners may request the retirement fund administrator to use the normal PAYE deduction rate, and not use the one provided by SARS. This, however, may put the pensioner back into a position where he or she, can expect a high tax bill at year-end.
It is important to note that the various fund administrators are already aware of all of the above.
28/01/2022