The Taxation Laws Amendment Act No 3 of 2008 (“the Act”) was promulgated on 22 July 2008. Below is a brief summary of some of the provisions of the Act.
Please Note: Where the amendments affect any of our retirement funds, rule amendments may be necessary before we can give effect to the amended legislation.
1. Retirement Annuities
- The maximum retirement age of 70 years has been removed. Members of retirement annuity funds can now retire at ANY age after age 55
- Retirement annuity benefits can be commuted on emigration. The emigration must be recognised by the South Africa reserve bank for the purposes of exchange control. The benefit may be subject to tax depending on the specific circumstances of the member
- Commutation of a lump sum from a “paid up” retirement annuity fund prior to retirement is provided for. The amount which can be commuted will be as determined by the Minister by notice in the Gazette. Currently the Gazetted amount is R7000.
2. Preservation Funds
- Pension and provident preservation funds are now defined in the Income Tax Act
- The Act also serves to govern (together with the Pension Funds Act) preservation funds and the intention is that this legislation should replace the SARS retirement fund notes (RF1/98 and its addenda etc.) which previously governed preservation funds
- Where a benefit is being transferred from an occupational pension or provident fund to a preservation fund there is no longer a requirement for a “participating employer”
- Where a benefit is being transferred from one preservation fund to another preservation fund the “eligibility” requirements as set out in RF1/98 no longer apply. More specifically it is no longer a requirement that the member:
- be employed; and/or
- be contributing to an employer’s retirement fund
- Benefits paid to non-member spouses in terms of valid divorce orders and unclaimed befits can be transferred into preservation funds
3. Living Annuities
- Living annuities are now defined in the Income Tax Act
- The Act also serves to govern (together with the Long Term Insurance Act) living annuities and the intention is that this legislation should replace the SARS retirement fund notes (RF1/96 and its addenda etc.) which previously governed living annuities
- More specifically the Act provides for the following:
- Commutation from living annuities up to an amount prescribed by the Minister by notice in the Gazette. We have been verbally advised that this amount is likely to be R75 000
- That the amount of income which can be drawn from a living annuity will be prescribed by the Minister by notice in the Gazette. Consequently this amount will remain within the existing parameters of 2.5%-17.5% until the Minister determines that it should be amended
- On the death of an annuitant the value of the annuity may be paid to the beneficiary/ies or the deceased estate as a lump sum. Alternatively, the beneficiary/ies may elect to receive an annuity