In terms of paragraph 4(1)(a) of the Second Schedule, a lump sum benefit is deemed to accrue to a Fund member on the date on which an election is made to commute. Due to an error by the member's intermediary, the amount for commutation was incorrectly sta
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.”
The last words (shall be final) are relevant – it means that no right of objection and appeal is possible. 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 get it adjusted before year end.
The determination of SARS must be made on a reasonable basis in the circumstances. In this instance it appears that the directive was issued on the basis of an error in the application. The taxpayer would be able to take the matter on review – section 9 of the Tax Administration Act.