Since the introduction of South Africa’s new ‘Two-Pot’ retirement system on September 1, 2024, the South African Revenue Service (SARS) has been inundated with applications.

As of September 10, 2024, SARS has processed a staggering 161,607 tax directive applications.

Breakdown of Applications

A significant majority of these applications, precisely 159,853, are for Savings Withdrawal Benefits.

This constitutes 98.9% of the total applications received. On average, this amounts to about 16,161 applications per day.

In terms of financial impact, the total gross amount of these lump-sum applications is an impressive R4.1 billion.

Tax Implications of Withdrawals

SARS Commissioner Edward Kieswetter explained that while contributions to pension or retirement funds were not taxed at the time of deposit, they are now subject to taxation upon withdrawal at the individual’s marginal tax rate.

This contrasts with the earlier practice of taxing at a reduced rate during retirement.

At an estimated average tax rate of 20%, this new system could potentially generate an additional R820 million in tax revenue for SARS.

As the year progresses and more South Africans begin to withdraw from their retirement savings, this figure is expected to rise sharply.

Early 2025 may see even more significant increases, particularly since withdrawals are restricted to once per year.

Efficient Processing of Applications

Kieswetter assured that SARS is committed to processing tax directive applications swiftly, with a turnaround time of no more than 48 hours.

Fund administrators submit these applications via eFiling, which indicates the amount of tax to be withheld before payout.

Taxpayers with existing tax debts should note that these will be added to the tax owed on their withdrawal benefits.

However, any deferred tax debt will not be deducted from the withdrawal amount if there are payment arrangements in place between SARS and the taxpayer.

Information and Assistance Channels

For those seeking more information about the new system, SARS offers several resources.

The SARS Online Query System on their website and the SARS WhatsApp channel at 0800 11 7277 are available for taxpayers to perform simulated tax calculations related to their two-pot withdrawals.