7 days to go before SARS closes the doors

Dear fellow taxpayer,

Seven days to go until the tax return submission window, via eFiling, closes...and this time you definitely shouldn’t bank on SARS extending the deadline!

If you haven’t submitted your return yet and are a little stuck as to how to proceed, take a look at chapter T05 2008 Tax Returns in update 6/2008 of the Practical Tax Handbook.

In this chapter, Andre van Staden unpacks the process of filling out your tax return, making it as easy as 1-2-3!

Mailbox

Answered by Matsika Vengesa of Tax Consulting SA

When is the best time to cash in my preservation fund?

Dear Matsika,

I have a preservation fund worth about R250 000. My average tax rate is zero as I have been unemployed for the last few years.

My understanding is that if I cash it in before 1 March 2009, SARS won’t charge me any tax on the amount. If I cash it in after 1 March 2009, I’ll be liable for tax at 18%.

Is this correct?

Answer:

You’re correct: it will be tax-free if you cash it in before 1 March 2009. This is because it will taxed at your average tax rate which, from what you say, is 0%. You will be liable for tax at 18% if you cash in after 1 March 2009.

Here is the table indicating the tax rates from 1 March 2009 onwards:

Lump sum pre-retirement                          Tax liability
R0 - R22 500                                                          0%
R22 501 - R600 000                                               18%
R600 001 - R900 000                 R103 950               plus 27% above R600 001
R900 001 +                               R184 950               plus 36% above R900 001

Until next week.
 
Regards
 
Nothando Hlatshwayo

Managing Editor
The Practical Tax Handbook