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?
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 Because the first R500 000 withdrawn from a retirement annuity is free from tax, the fact that a tax liability was raised means that you must have taken cash withdrawals from other retirement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.