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[FAQ] Tax Tips
- 04 August 2023
- Individuals Tax
- The Tax Faculty
This article is based on tax law for the year ending 29 February 2024.
Question:
What are the tax implications and options available for individuals who are receiving annuities from a retirement fund or insurer during the 2024 year of assessment?
Answer:
Individuals may have multiple sources of income, such as other annuities or remuneration from other employers. In such cases, the retirement fund or insurer responsible for payment must withhold
employees' tax by applying a fixed tax rate directed by SARS.
SARS determines this fixed tax rate based on the most recent assessed information of the individual. However, using this fixed rate may lead to the taxpayer paying more tax than what will be finally assessed. This discrepancy could occur due to factors like medical or other rebates, or changes in the individual's circumstances throughout the year.
Fortunately, SARS allows the individual opt-out of using the fixed tax rate. To do so, affected taxpayers need to inform the fund administrator in writing about their decision to opt out. By opting out, the individual will then be taxed at the tax rates according to the tax tables provided by SARS.
It it is essential to note that choosing to opt out may result in the individual having a tax debt when assessed the following year, and they will have to pay SARS accordingly. So, individuals should carefully consider their financial situation and potential tax implications before making this decision.
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