Pension in South Africa: SARS’s New Tax Directive Costs Pensioners

Pension in South Africa: SARS's New Tax Directive Costs Pensioners
  • Pensioners in South Africa are one of the most heavily affected by South Africa’s reviewed tax rates

Pension in South Africa is in focus as the heavy amount of tax imposed by the South Africa Revenue Service (SARS) in October has cost many members of the Government Employment Pensions Fund (GEPF) a significant amount of money.

Following an amendment to the IBIR-006 Tax Directive Interface Specification by SARS in March 2022, thousands of beneficiaries have lost a huge part of their pay.

According to the tax agency, this was to deal with the issue of “tax debt” that usually happens because many pensioners had more than one income by the year-end.

SARS mentioned that if it keeps taxing people at their normal rate, they will inevitably end up with “tax debt” which it will have to find a way to recover.

According to Phumzile Mda, CFO at GPAA Government Pensions Administration Agency, although the pensioners only started feeling the effect of this move recently, the fixed rate had already been introduced back in July but very few people reacted.

SARS was accused of not communicating this move effectively but the tax agency defended itself by claiming that it explained the tax deduction in detail to the GEPF, and that it was its fault for not communicating it to its members.

It mentioned that back in September, it sent numerous emails and SMSes, and even told some people to visit their office to sign some forms that would help them opt out of this arrangement if they wanted.

Pension in South Africa: Citizen Reacts

In a message to CapeTalk (a commercial AM radio station in Cape Town), a listener mentioned how her father, who had retired last year, was affected by the revised tax rate when the tax agency failed to notify him before removing a 40.99% tax on his pay.

She mentioned that her father only became aware of the move when he visited the GEPF’s office in Cape Town and they had him fill out a form which they then sent back to SARS.

She then demanded that the tax agency explain how it came up with multiple sources of income as the only income her father had received was his lump sum on retirement, which required a tax directive from SARS before it was paid.

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