# Thread: Tax rates on lump sum

1. ## Tax rates on lump sum

What is the tax rate on the payout lump sun when one resign from the public service?is the tax rate influenced by the length of service or by the amount paid out?

2. is this a payout from a pension fund, provident fund etc

3. It should be from GEPF .I guess all public service employees belong to GEPF

4. The formula used for determining the 'tax free' portion of your lump sum is;

Z = C + E - D

Where:
Z = Tax free portion amount
C = R300 000
E = personal contributions that were not permitted as a deduction, plus (if any) a
tax-free public sector portion previously transferred to the fund
D = previous deductions against lump sum benefits

Taxable portion and tax rate

Not exceeding R300 000 - 18 per cent of the taxable income
Exceeding R300 000 but not exceeding R600 000 - R54 000 plus 27 per cent of the taxable income exceeding R300 000
Exceeding R300 000 - R135 000 plus 36 per cent of the taxable income exceeding R600 000

5. If I understand you correctly,R300 000 of any amount paid out is non taxable,the remainder of the lump sum will be taxed at 36%

6. Originally Posted by Kgabogk
If I understand you correctly,R300 000 of any amount paid out is non taxable
No not necessarily, you HAVE to use the formula to work out the tax free portion

the remainder of the lump sum will be taxed at 36%
Again no, the remainder will fall in one of those 3 categories
e.g.
If remainder is R250000 (less than R300000) - 18% of R250000
If remainder is R450000 (more than R300000,less than R600000) - R54 000 plus 27 per cent of R150000 (exceeding R300000)
If remainder is R950000 - R135 000 plus 36 per cent of R350000 (exceeding R600000)

7. Pampoenskyf is wrong. - > You are applying Retirement Lump Sum benefits not Retirement Lump Sum Withdrawal Benefits.

Since you are resigning your lump sum will be subject to a more punitive rate:

0 – R22 500
0%
R22 501 – R600 000
18% of the amount above R22 500
R600 001 – R900 000
R103 950 + 27% of the amount above R600 000
R900 001 and above
R184 950 + 36% of the amount above R900 000

Thats the rate you will pay - however you can reduce it with any pension deductions not previously allowed - sec 11(k) and some others - not gonna go into detail

8. Sorry, you're right. I see the mistake

9. when did you join the public service? pre 1998 service is all exempt, after 1998 the lump sum is taxable as per the rates.

10. my dad passed away in may this year and my mom did not pay tax on the first R300 000,00 either.

11. Originally Posted by mika1000
my dad passed away in may this year and my mom did not pay tax on the first R300 000,00 either.
That's correct But that was paid out as a result of death not resignation.

12. @Griz,thanks for the correction, I joined the public service in 1994,I thought a 20 year service guarantees a lesser tax rate on the payout.

13. 1994 to 1998 is tax free. after that is taxed the same as everyone else. the GEPF must submit the dates correct dates on the tax directive in order for the tax free portion to be taken into account.

14. The concession of the first R300,000 cash withdrawal is, as I understand it, a once-off allowance.
In other words if you had more than one provident / retirement fund with capital in them, then only a once-per-lifetime R300K is tax free.
Naturally the cap amount of R300K may be increased in future as inflation devalues the money.

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