WITHDRAWAL OR RESIGNATION: WINDING UP: DEDUCTIONS

6.

(1)     The deduction to be allowed for the purposes of paragraph 2(1)(a)(ii) or (b) is an amount equal to –

(a)     in the case of a lump sum benefit contemplated in paragraph 2(1)(b)(iA) and (iB), so much of the benefit as is paid or transferred for the benefit of the person from a-

(i)      pension fund, pension preservation fund, provident fund or provident preservation fund into any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund; or

(ii)     retirement annuity fund into any retirement annuity fund; and

[Item (a) amended by section 92(1)(a)-(f) of Act 24 of 2011, by section 99(1)(a) and (b) of Act 22 of 2012 and by section 65(1)(a) and (b) of Act 23 of 2018 and substituted by section 113(1)(a) of Act 31 of 2013, by section 50(1)(a) of Act 34 of 2019 and by section 50(1)(b) of Act 34 of 2019 deemed effective on 1 March, 2021 and applicable in respect of transfers made on or after that date (effective date in section 50(3) of Act 34 of 2019 as substituted by section 40 of Act 20 of 2022)]

(b)     in any other case, so much of the aggregate of-

(i)      contributions that did not rank for a deduction against the person’s income in terms of section 11F to any pension funds, pension preservation funds, provident funds, provident preservation funds and retirement annuity funds of which he or she is or previously was a member;

[Sub-item (i) substituted by section 113(1)(b) of Act 31 of 2013, by section 64(1)(a) of Act 17 of 2017 and by section 41(1) of Act 23 of 2020 deemed effective on 1 March, 2016]

(ii)     any amount transferred for the benefit of the person to any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund as a result of an election made as contemplated in section 37D(4)(b)(ii)(cc) of the Pension Funds Act;

[Subitem (ii) substituted by section 87 of Act 25 of 2015 effective on 8 January 2016]

(iii)    any amount that is deemed to have accrued to the person as contemplated in paragraph 2(1)(b)(iB);

(iv)    any amount, to the extent that that amount was paid or transferred to a pension preservation fund or provident preservation fund as an unclaimed benefit as defined in section 1 of the Pension Funds Act and was subject to tax prior to that transfer or payment; and

[Subitem (iv) substituted by section 87 of Act 25 of 2015 effective on 8 January 2016]

(v)     any other amounts in respect of which the formula in paragraph 2A applies, which have been-

(aa)   paid into a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund for the person’s benefit by a public sector fund; and

(bb)   transferred into a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund directly from a fund contemplated in subitem (aa) for the person’s benefit, less the amount represented by symbol A when applying that formula,

[Subitem (bb) substituted by section 65 of Act 23 of 2018 effective on 1 March 2018]

[Subitem (v) substituted by section 64 of Act 17 of 2017 effective on 1 March 2018]

as has not been exempted in terms of section 10C or has not previously been allowed to the person as a deduction in terms of this Schedule in determining any amount to be included in that person’s gross income.

(2)     The amount determined in terms of subparagraph (1) may not exceed the amount of the lump sum benefit in respect of which it is allowable as a deduction.

(3)     For the purposes of this paragraph, the surrender value of any policy of insurance ceded or otherwise made over to the person by any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund and ceded or  otherwise made over by the person to any other such fund, or any amount paid by the person into the latter fund in lieu of or as representing such surrender value or a portion thereof, shall be deemed to be an amount paid into the latter fund by the former fund for the benefit of the person.

[Subparagraph (3) substituted by section 99 of Act 22 of 2012 effective on1 March 2012 and section 113 of Act 31 of 2013 effective on 1 March 2016 – comes into operation in terms of section 113 of Act 31 of 2013 on 12 December 2013, substituted by section 159 of Act 25 of 2015 on 1 March 2016]

BENEFITS ACCRUING UPON RETIREMENT AND BENEFITS DEEMED TO HAVE ACCRUED IMMEDIATELY PRIOR TO PERSON’S DEATH: DEDUCTIONS

 

5.

(1)     The deduction to be allowed for the purposes of paragraph 2(1)(a) is an amount equal to so much of-

(a)     contributions that did not rank for a deduction against the person’s income in terms of section 11F to any pension fund, pension preservation fund, provident fund, provident preservation fund and retirement annuity fund of which he or she is or previously was a member;

[Item (a) substituted by section 112(1) of Act 31 of 2013, by section 63(1)(a) of Act 17 of 2017 and by section 40(1) of Act 23 of 2020 deemed effective on 1 March, 2016]

(b)     any amount transferred for the benefit of the person to any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund as a result of an election made in terms of section 37D(4)(b)(ii) of the Pension Funds Act;

[Paragraph (b) substituted by section 86 of Act 25 of 2015 effective on 8 January 2016]

(c)     any amount that is deemed to have accrued to the person as contemplated in paragraph 2(2)(b);

(d)     any amount, to the extent that that amount was paid or transferred to a pension preservation fund or provident preservation fund as an unclaimed benefit as defined in section 1 of the Pension Funds Act  and was subject to tax prior to that transfer or payment; and

[Paragraph (d) substituted by section 86 of Act 25 of 2015 effective on 8 January 2016]

(e)     any other amounts in respect of which the formula in paragraph 2A applies, which have been-

(i)      paid into a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund for the person’s benefit by a public sector fund; and

(ii)     transferred into a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund directly from a fund contemplated in subitem (i) for the person’s benefit,

less the amount represented by symbol A when so applying that formula,

[Item (e) substituted by section 63 of Act 17 of 2017 effective on 1 March 2018]

as has not been exempted in terms of section 10C or has not previously been allowed to the person as a deduction in terms of this Schedule in determining the amount to be included in that person’s gross income.

(2)     The amount determined in terms of subparagraph (1) may not exceed the amount of the lump sum benefit in respect of which it is allowable as a deduction.

(3)     For the purposes of this paragraph, the surrender value of any policy of insurance ceded or otherwise made over to the person by any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund and ceded or otherwise made over by the person to any other such fund, or any amount paid by the person into the latter fund in lieu of or as representing such surrender value or a portion thereof, shall be deemed to be an amount paid into the latter fund by the former fund for the benefit of the person.

4.

(1)     Notwithstanding the rules of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund, and subject to paragraphs 3 and 3A, any lump sum benefit shall be deemed to have accrued to a person who is a member of such fund on the earliest of the date-

(a)     on which an election is made in respect of which the benefit becomes recoverable;

(b)     on which any amount is deducted from the benefit in terms of section 37D(1)(a), (b) or (c) of the Pension Funds Act;

[Item (b) substituted by section 85 of Act 25 of 2015 effective on 8 January 2016]

(c)     on which the benefit is transferred to another pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund;

(d)     ……….

[Item (d) deleted by section 71 of Act 43 of 2014 effective on 1 March 2015]

(e)     of his or her death,

and shall be assessed to tax in respect of the year of assessment during which such lump sum benefit is deemed to accrue.

(2)     If upon a member’s withdrawal or resignation from or the winding up of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund on or after the fifteenth day of March, 1961, a policy of insurance is ceded or otherwise made over to or in favour of such member before the date of promulgation of the Income Tax Act, 1964, any lump sum due in respect of such policy upon its maturity or surrender before such date shall be deemed to be a lump sum benefit accruing to such member from a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund, as the case may be, on the date of such maturity or surrender, or, if such member dies before such last-mentioned date, on the date of his or her death, and shall be assessed to tax in respect of the year of assessment during which such benefit is deemed to accrue as though it were a lump sum benefit derived by him or her upon his or her withdrawal or resignation from the fund or upon his or her retirement or immediately prior to his or her death, as the case may be:

Provided that if after the cession or making over of such policy any premiums are paid thereon by such member, there shall be deducted from such lump sum, in addition to any other deduction to which such member may be entitled in terms of this Schedule, an amount which bears to such lump sum the same ratio as the sum of the premiums paid by him after such cession or making over bears to the sum of all the premiums paid on such policy.

(2)bis If a policy of insurance is ceded or otherwise made over to or in favour of a person who is a member of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund by that fund on or after the date of commencement of the Income Tax Act, 1964, the surrender value of such policy shall, provided such person retired or ceased to be a member of such fund on or after the fifteenth day of March, 1961, be deemed for the purposes of this Schedule to be a lump sum benefit accruing to such person from such fund on the date of such cession or making over.

(3)     . . . . . .

[Subparagraph (3) substituted by section 36(1) of Act 21 of 1995, by section 97(1)(c) of Act 22 of 2012, by section 85(b) of Act 25 of 2015 and by section 63(1) of Act 15 of 2016 and deleted by section 19(1) of Act 20 of 2022 with effect from 1 March, 2023]

(4)     ……….

3.     Any lump sum benefit which becomes recoverable from-

(a)     a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund; or

(b)     an insurer as defined in section 29A(1) if that lump sum benefit is payable by, or provided in consequence of membership or past membership of, a fund contemplated in subparagraph (a),

in consequence of or following upon the death of a person who is or was a member of that fund must, on the date of payment of that lump sum benefit, be deemed to have accrued to that person immediately prior to the death of that person: Provided that-

(i)      so much of any tax payable as is due to the provisions of this paragraph may be recovered from the person by whom the lump sum benefit in question is received;

(ii)     where any annuity or portion of an annuity (including a living annuity) which becomes payable on or in consequence of or following upon the death of a person who is or was a member of any such fund has been commuted for a lump sum, such lump sum shall for the purposes of this paragraph be deemed to be a lump sum benefit which has become recoverable in consequence of or following upon the death of such person;

(iii)    where any such lump sum benefit becomes payable but the dependants or nominees of that member or past member elect an annuity (including a living annuity) that is purchased or provided by that fund, no lump sum benefit shall be deemed to have so accrued to the extent that the lump sum benefit was utilised to purchase or provide the annuity; and

(v)     where any such lump sum benefit is paid to a pension preservation fund or provident preservation fund as an unclaimed benefit as defined in the Pension Funds Act, no lump sum benefit shall be deemed to have so accrued.

[Paragraph (v) substituted by section 83 of Act 25 of 2015 effective on 8 January 2016]

2.

(1)     Subject to section 9(2)(i) and paragraphs 2A, 2C and 2D, the amount to be included in the gross income of any person for any year of assessment in terms of paragraph (e) of the definition of “gross income” in section 1 shall be—

(a)     any amount received by or accrued to that person by way of a lump sum benefit derived in consequence of or following upon-

(i)      his or her retirement or death;

(ii)     the termination or loss of his or her employment due to-

(AA)  his or her employer having ceased to carry on or intending to cease carrying on the trade in respect of which he or she was employed or appointed; or

(BB)  that person having become redundant in consequence of his or her employer having effected a general reduction in personnel or a reduction in personnel of a particular class:

Provided that this subitem does not apply to any amount received by or accrued to a person by way of a lump sum where that person’s employer is a company and that person at any time held more than five per cent of the equity shares or members’ interest in that company; or

(iii)     the commutation of an annuity or portion of an annuity,

less any deduction permitted under the provisions of paragraph 5 or 6;

[Words following subitem (iii) substituted by section 80 of Act 7 of 2010 and amended by section 62 of Act 17 of 2017 effective on 1 March 2018, applies in respect of years of assessment commencing on or after that date]

(b)     any amount –

(iA)    assigned in terms of a divorce order granted on or after 13 September 2007 under section 7(8)(a) of the Divorce Act, 1979 (Act 70 of 1979) or in terms of any order made by a court in respect of the division of assets of a marriage according to the tenets of a religion pursuant to its dissolution, to the extent that the amount so assigned-

(aa)   constitutes a part of a pension interest, as defined in section 1 of the Divorce Act, 1979 (Act No. 70 of 1979), of a member of a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund; and

(bb)   is due and payable on or after 1 March 2012 to a person who is the former spouse of that member by that pension fund, pension preservation fund, provident fund or provident preservation fund or retirement annuity fund;

[Sub-item (iA) substituted by section 80(1)(h) of Act 7 of 2010 and by section 92(1)(c) of Act 22 of 2012 and amended by section 29(1) of Act 5 of 2026 deemed effective on 1 September, 2024]

(iB)    that is transferred for the benefit of that person to any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund from any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund of which that person is or previously was a member; and

(ii)     other than an amount contemplated in item (a) or subitem (iA) or (iB), received by or accrued to that person by way of a lump sum benefit from or in consequence of membership or past membership of any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund,

less any deduction permitted under paragraph 6;

[Item (b) amended by section 62(1) of Act 17 of 2017 and by section 3(1)(a) of Act 12 of 2024 effective on 1 September, 2024 and applicable in respect of years of assessment commencing on or after that date]

(c)     any amount of a member’s retirement interest transferred for the benefit of that person on or after normal retirement age, as defined in the rules of the fund, but before retirement date, less any deductions permitted under paragraph 6A; and

[Item (c) added by section 62(1) of Act 17 of 2017 and substituted by section 3(1)(b) of Act 12 of 2024 and by section 30(1) of Act 42 of 2024 effective on 1 March, 2025 and applicable in respect of years of assessment commencing on or after that date]

(d)     any amount-

(i)      transferred on termination of membership in a fund to another fund for the benefit of that person as contemplated in paragraph 6B(a), (b) or (c); and

(ii)     contemplated in item (b)(iA), transferred for the benefit of that person to another fund as contemplated in paragraph 6B(a), (b) or (c),

less any deductions permitted under the provisions of paragraph 6B.

[Subparagraph (1) amended by section 92(1)(a) and (b) of Act 22 of 2012 and by section 48 of Act 34 of 2019. Item (d) added by section 3(1)(c) of Act 12 of 2024 and substituted by section 2(1) of Act 44 of 2024 deemed to have come into operation on 1 September, 2024]

(2)     An amount contemplated in subparagraph (1)(b) shall be deemed to accrue to a person –

(a)     in the case of an amount contemplated in subparagraph (1)(b)(iA), on the date on which the amount is due and payable as contemplated in subparagraph (1)(b)(iA)(bb); and

(b)     in the case of an amount contemplated in subparagraph (1)(b)(iB), on the date of its transfer.