I have two clients both older than 77 years who have very small annuities. They are struggling and getting a piddly RA payout each month helps nothing. The value of their annuities are R32 819 and R23773. How do we go about getting SARS to authorise the i
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
It is, to the best of our knowledge, not an instance where SARS must authorise the insurer.
For purposes of the Income Tax Act, “living annuity” means a right of a member or former member of a … retirement annuity fund, or his or her dependant or nominee, or any subsequent nominee, to an annuity purchased from a person or provided by that fund on or after the retirement date of that member or former member in respect of which …
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the value of the annuity is determined solely by reference to the value of assets which are specified in the annuity agreement and are held for purposes of providing the annuity;
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…;
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the full remaining value of the assets contemplated in paragraph (a) may be paid as a lump sum when the value of those assets become at any time less than an amount prescribed by the Minister by notice in the Gazette;
The value prescribed in Notice 1164 in Government Gazette 31554 of 30 October 2008 is currently:
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R50 000 if an amount was previously commuted at retirement; or
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R75 000 in any other case.
We believe the member will have to apply to the fund. The fund, or provider of the living annuity, will then apply to SARS for a directive, and then make the payment to the annuitant. This assumes that the “the value of assets which are specified in the annuity agreement and are held for purposes of providing the annuity” (paragraph (a) above) is less than the relevant amount.