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Can I claim back for tax on my RA payout?

No contributions to any tax-deductible investment product can result in you receiving tax back from Sars.

I recently turned 55 and one of my retirement annuity (RA) policies paid out R150k. I took the total amount and Sars taxed me R12k on the 2/3 portion. If I now invested this 2/3 portion in a living annuity fund, with my other RAs, can I claim back the R12k from Sars?

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As we do not have full insight into your circumstances, we have had to make some assumptions when answering your question. When retiring from an individual retirement annuity, you are permitted to make a one-third lumpsum cash withdrawal, with the first R500 000 being tax-free. We have therefore assumed that the total value of your RA was R150 000 and that you were taxed an amount of R12 000 on your one-third withdrawal, which is R50 000. You intend using the remaining two-thirds to purchase a living annuity as you have done with your other retirement money.

Taking these assumptions into account, it seems as though your one-third withdrawal of R50 000 from your RA triggered tax of R12 000 which was paid over to Sars. Because the first R500 000 withdrawn from a retirement annuity is free from tax, the fact that a tax liability was raised means that you must have taken cash withdrawals from other retirement annuities at some stage, or received funds in respect of a severance package, which were more than R500 000.

To answer your question, if you invest your cash withdrawal of R50 000 into a living annuity, you will not be able to claim the R12 000 back from Sars. Unlike contributions made to a retirement annuity, voluntary contributions into a living annuity are not tax-deductible. The reason for this is that the R12 000 tax you paid on withdrawal is not income tax. It is a withdrawal tax on the retirement tax tables.

No contributions to any tax-deductible investment product can result in you receiving this tax back from Sars.

 

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