How can we claim the difference back on a pension fund lump sum? The taxpayer has retired from his pension fund and is entitled to the formula C calculation as the pension was due to government employment. Due to a technical issue on the SARS system he co
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
In terms of paragraph 9(3)(a) of the Fourth Schedule to the Income Tax Act, the “amount to be deducted or withheld in respect of employees' tax from any lump sum to which paragraph (d) or (e) of the definition of 'gross income' in section 1 … shall be ascertained by the employer from the Commissioner before paying out such lump sum, and the Commissioner's determination of the amount to be deducted or withheld shall be final.” In other words, no right of objection and appeal is possible.
The determination of SARS must, however, be made on a reasonable basis in the circumstances. The taxpayer would be able to take the matter on review – section 9 of the Tax Administration Act.
As the directive is not an assessment, the error will normally be fixed on assessment, but it would, from a cash flow point of view be better to go the section 9 route and get it adjusted before year end.
We are not sure why the fund is not prepared to cancel the directive request and submit a new one. We accept that there was only one transfer from the public sector fund and that it was to a qualifying fund.