The transfer of retirement funds: Anomalies no more

In terms of paragraph 2(l) of the Seventh Schedule to the Income Tax Act No 58 of 1962, where an employer has made any contribution for the benefit of any employee to any pension fund, provident or retirement annuity fund, such contribution constitutes a fringe benefit in the hands of an employee. Such fringe benefit is included in the gross income of an employee. The amounts contributed by the employer forms part of a so-called employer reserve account and constitutes a post-tax amount as the fringe benefit has already been taxed. 

22 Feb 2018 1 min read Article

However, the Budget notes that currently, the transfer of fund amounts between, or within, retirement funds at the same employer has inadvertently led to a tax liability for members, due to the current wording of the legislation. In principle, there should be no additional tax consequence for members if the transfers refer to amounts that have already been contributed to the retirement fund. The Budget therefore proposes that legislative amendments will be retrospectively introduced to correct these unintended tax liabilities. This proposed amendment is likely to be welcomed by all persons who have contributed to a retirement fund, especially as it will likely apply retrospectively.

The information and material published on this website is provided for general purposes only and does not constitute legal advice. We make every effort to ensure that the content is updated regularly and to offer the most current and accurate information. Please consult one of our lawyers on any specific legal problem or matter. We accept no responsibility for any loss or damage, whether direct or consequential, which may arise from reliance on the information contained in these pages. Please refer to our full terms and conditions. Copyright © 2024 Cliffe Dekker Hofmeyr. All rights reserved. For permission to reproduce an article or publication, please contact us