The company wants to restructure my branch. They say that there is just one post available for the amount of R 6500 per month. This is way less than I currently earn. So they said there is a voluntary retrenchment package. It was better for me to take thi
Important:
This answer is based on tax law for the tax year ending 28 Ferbuary 2020.
Answer:
The R30 000 exemption was found in section 10(1)(x), bit it was deleted by section 18(1)(w) of Act 7 of 2010. A new dispensation was then introduced and shortly thereafter a separate tax table for severance benefits was published annually. This table is exactly the same as the table for lump sums taken on retirement from retirement funds. We provided the definition of a severance benefit in our previous response.
Based on the information provided, we are not sure if the proposed ‘restructure’ means that you, and other employees in the branch became redundant in consequence of a general reduction in personnel or a reduction in personnel of a particular class by the person's employer.
The only relief will be if the amount was a severance benefit. According to the table the first R500 000 will be taxed at 0%, but that of course means that the subsequent lump sum (on retirement) will then have lost part of the 0% amount. The documents they gave you will of course have to explain this so that SARS can determine if the amount is in fact a severance benefit. We have already indicated that the leave pay must be treated differently.