I am writing to inquire if it is possible to get my retirement fund that has been taken by Sars back to me? I am 46 years old. I have been working as a security officer and I was retrenched on October 31 2020. I submitted my claim to Private Security Services Provident Fund. I was told that my payout was R64 000 but only R25 000 was paid into my account. When I followed up, I was told that it had been taken by Sars as a settlement for what I ‘owe’ it. So, I need your advice on how I can claim my money back. I will be grateful for your response.
Rick Briers-Danks - Veritas Wealth
It is never nice being told one thing and receiving another – especially when it comes to your money!
There are broadly two reasons why any amount paid into your account is less than what you had accumulated in your provident fund. The first reason is that the amount you were due (plus other retirement fund lump sums you’ve previously received) was above the “tax-free” amount and was therefore subject to tax.
The tax you pay on a retirement fund lump sum benefit is levied according to a sliding scale i.e. the greater the lump sum amount, the higher the tax rate. The retirement lump sum tax tables are also applied on a lifetime or cumulative basis. Each lump sum payment is not viewed in isolation – the tax payable now will depend on whether or not you’ve previously received lump sums from a retirement fund, what those previous amounts were and the circumstances under which you’re receiving the lump sum (i.e. did you resign, were you retrenched, or have you retired).
The second and more likely reason in my opinion is that you have an outstanding liability with the South African Revenue Service (Sars) that Sars is entitled to collect.
The Tax Administration Act entitles Sars (under Section 179) to instruct a third party who holds money for a taxpayer, like a retirement fund, to deduct these liabilities from the money they hold for you, without notifying you. This is a powerful mechanism that is available to Sars to collect a tax debt. In utilising this provision, Sars may serve such notice on your bank or retirement fund, which will then be obligated to pay over to Sars the amount stipulated in the notice without notifying you.
When you selected to do a withdrawal from your retirement fund, the retirement fund administrators have to request a tax directive from Sars.
From the circumstances you’ve described, it sounds like Sars instructed the retirement fund administrators to deduct an outstanding tax liability from the lump sum.
It sounds like Sars had an outstanding liability against your tax number and ID.
We are not able to say whether Sars was correct in its assessment of your tax liability. However, you are entitled to request reasons from Sars and to object to those reasons if you feel they are not valid. You can submit an electronic Request for Reasons either via e-filing or at a Sars branch. We encourage you to contact Sars and ask them for a breakdown of the amount deducted and what it relates to. That will enable you to establish whether or not you should dispute their assessment.
If you do not get answers you are satisfied with you are able to contact the office of the tax ombudsman on Complaints@taxombud.gov.za or 0800 662 837.