More than 200,000 taxpayers are understating their incomes when they are making withdrawals from the two-pot retirement system, according to a statement from the South African Revenue Service (Sars).
Sars Commissioner Edward Kieswetter said that the tax authority is concerned about the number of taxpayers who have been identified for declaring incorrect taxable incomes.
“Sars is deeply concerned that 213,654 taxpayers have been identified where they have declared incorrect taxable income with the view to have a more favourable tax rate,” Kieswetter said.
Despite public information about a marginal tax rate that will be imposed on a two-pot retirement withdrawal, taxpayers are understating their incomes, according to Sars.
“Taxpayers are reminded that tax will be imposed on a withdrawal at a marginal tax rate ranging between 18%-45%, depending on their scales. Despite this public information, there are taxpayers who are wilfully understating their incomes,” Sars said.
According to Kieswetter, taxpayers who understate their income, are intentionally involved in evading their tax obligation.
“A penalty will be imposed on taxpayers who have understated income. Finally, I wish to caution taxpayers to refrain from this conduct that borders on criminality, as there are real consequences for this behaviour,” Kieswetter said.
Two-pot retirement system and tax
Fund members need to keep in mind that if they owe money to Sars, the amount that they owe will be taken out of their two-pot retirement system withdrawal before they receive any money.
According to Nashalin Portrag, Head of FundsAtWork and Distribution, Momentum Corporate, any arrear tax will be deducted by Sars before any benefit is paid out from the savings component.
John-Paul Fraser, tax attorney, Tax Consulting SA said: “Fund members need to be aware that before any payment will be released, the fund administrator will need to apply to Sars for a tax directive.
“Where the taxpayer has an outstanding tax debt with Sars, the fund administrator will be issued with a notice to pay this debt from the withdrawal amount first and only pay the taxpayer the balance.”
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