Tax Rates
A member of a retirement fund becomes entitled to a lump sum benefit when his or her membership of that retirement fund terminates. The taxable portion of the lump sum benefit is included in the taxpayer’s gross income and is subject to the rates of tax applicable to lump sum benefits.
A lump sum benefit is any amount payable by a retirement fund to a member or former member in consequence of his or her membership or past membership in that specific retirement fund. Types of lump sum benefits payable by a retirement fund are:
- withdrawal benefits;
A withdrawal benefit is an amount that becomes payable when a member elects to terminate his or her membership in that retirement fund before reaching retirement age, for any reason other than retirement, death or retrenchment.
- retirement benefits
A retirement benefit is an amount that becomes payable by a retirement fund to a member as a result of death, or when the member elects to retire from that retirement fund after he or she has reached retirement age or has been retrenched. The lump sum benefit payable depends on the type of retirement fund involved.
A “severance benefit”, is not a lump sum benefit as it is an amount payable by an employer to an employee and not an amount payable by a retirement fund to a member or former member of that retirement fund.
SARS use different tax rates when an employee has a Withdrawal of Retirement benefit. Please click on the applicable link to see the tax rate applicable to your scenario:
Click on the following link if you are looking for the normal tax rates.
Retirement Fund tax deduction:
- Deduction Limit: You can deduct up to 27.5% of your taxable income (or remuneration) from your retirement contributions (pension, provident, or retirement annuity funds).
- Monetary Cap: This deduction is capped at a maximum of R430 000 per year.
- Total Contributions: The R430 000 cap includes both your own contributions and those made by your employer on your behalf.
Tax treatment of Withdrawal Benefit
| Taxable income (R) | Rate of tax (R) |
|---|---|
| 1 – 27 500 | 0% |
| 27 501 – 726 000 | 18% of taxable income above 27 500 |
| 726 001 – 1 089 000 | 125 730 + 27% of taxable income above 726 000 |
| 1 089 001 and above | 223 740 + 36% of taxable income above 1 089 000 |
Tax treatment of Retirement benefit
2027 tax year
| Taxable income from lump sum benefits | Rates of tax |
| 1 – 550 000 | 0% of taxable income |
| 550 001 – 770 000 | 18% of taxable income above 550 000 |
| 770 001 – 1 155 000 | 39 600 + 27% of taxable income above 770 000 |
| 1 155 001 and above | 143 550 + 36% of taxable income above 1 155 000 |
Individual Tax Rates
2027 tax year (1 March 2026 – 28 February 2027)
| Taxable income (R) | Rates of tax (R) |
|---|---|
| 1 – 245 100 | 18% of taxable income |
| 245 101 – 383 100 | 44 118 + 26% of taxable income above 245 100 |
| 383 101 – 530 200 | 79 998 + 31% of taxable income above 383 100 |
| 530 201 – 695 800 | 125 599 + 36% of taxable income above 530 200 |
| 695 201 – 887 000 | 185 215 + 39% of taxable income above 695 800 |
| 887 001 – 1 878 600 | 259 783 + 41% of taxable income above 887 000 |
| 1 878 601 and above | 666 339 + 45% of taxable income above 1 878 600 |
Tax Rebates
| Tax Rebate | Tax Year |
|---|---|
| 2027 | |
| Primary | R17 820 |
| Secondary (65 and older) | R9 765 |
| Tertiary (75 and older) | R3 249 |
Tax Thresholds
| Age | Tax Year |
|---|---|
| 2027 | |
| Under 65 | R99 000 |
| 65 an older | R153 250 |
| 75 and older | R171 300 |