Taxation Laws Amendment Act No 3 of 2008
Taxation Laws Amendment Act No 3 of 2008 (“the Act”) was revealed on 22 July 2008. A Brief summary is given below for some of the provisions of the Act.
Please Note: If any Amendments may affect out retirement funds, rule amendments can be necessary before giving effect to amended legislation.
1. Retirement Annuities
- There has been a removal of the maximum retirement age of 70. Members of retirement annuity funds can retire at any age after age 55.
- Retirement annuity benefits can be commuted on emigration. Recognition of emigration must given by the South Africa reserve bank for the purposes of exchange control. Depending on the specific circumstances of a member the benefit may be subjected to tax.
- Commutation of a lump sum from a retirement annuity fund prior to retirement is provided for. The amount which can be commuted will be as determined by the Minister by notice in the Gazette. The Gazetted amount is currently R7000.
2. Preservation Funds
- From now on the pension and provident preservation funds are defined in the Income Tax Act.
- The Act also serves to govern (in conjunction with the Pension Funds Act) preservation funds and the intention is that this legislation should replace the SARS retirement fund notes (RF1/98 and its addenda etc.) which previously governed preservation funds
- Where a benefit is being transferred from an occupational pension or provident fund to a preservation fund here is no longer a requirement for a “participating employer”
- Benefits are being transferred from one preservation fund to another preservation fund the “eligibility” requirements as set out in RF1/98 no longer apply. More specifically it is no longer a requirement that the member:
- be employed; and/or
- contributing to an employer’s retirement fund
- When benefits is paid to non-member spouses in terms of valid divorce orders and unclaimed befits can be transferred into preservation funds
3. Living Annuities
- Defined in the Income Tax Act is the Living annuities
- The Act also serves to govern (in conjunction with the Long Term Insurance Act) living annuities. The intention is that this legislation should replace the SARS retirement fund notes (RF1/96 and its addenda etc.) which previously governed living annuities
- The Act provides specifically for the following:
- Commutation from living annuities up to an amount prescribed by the Minister by notice in the Gazette. Verbally advised that this amount is likely to be R75 000
- The amount of income can be drawn from a living annuity, that amount will be prescribed by the Minister by notice in the Gazette. Consequently this amount will remain within the existing parameters of 2.5%-17.5% until the Minister determines that it should be amended
- On the death of an annuitant the value of the annuity may be paid to the beneficiary/beneficiaries or the deceased stated to a lump sum. Alternatively, the beneficiary/beneficiaries may elected to receive an annuity
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