Sars: Over two million taxpayers withdraw from savings pot! The South African Revenue Service (SARS) has announced that it has received 2,664,279 applications for tax directives related to withdrawals from the two-pot system’s Savings Withdrawal Benefit.
According to SARS, out of the total applications, 2,403,379 tax directives were approved, allowing the release of funds to applicants. To date, a gross lump sum of R43.42 billion has been paid out.
However, some applications were rejected due to issues such as incorrect identity numbers, tax numbers, and other administrative errors.
SARS Thanks Retirement Fund Managers for Cooperation
SARS has expressed gratitude to retirement fund management entities for their cooperation and professionalism, which have enabled the efficient processing of applications.
“SARS would like to thank retirement fund management entities for their friendly and professional cooperation that has allowed SARS to play its part effectively and efficiently by speedily issuing the volumes of tax directives needed to date,” the tax authority said in a statement.
Important Reminders for Taxpayers Applying for Withdrawals
SARS has issued important reminders for taxpayers who wish to apply for a withdrawal under the two-pot system:
- Verify Tax Numbers: Ensure that your tax number is correct and up to date before applying.
- Correct Identity Details: Make sure that the correct identity number is provided.
- Check Outstanding Tax Debt: Taxpayers must clear any outstanding debt with SARS before they can receive their funds.
Additionally, SARS warned that before a withdrawal is paid out, the pension fund will be instructed to deduct any outstanding tax debt on behalf of SARS before transferring funds to the applicant.
Taxation on Withdrawals: 18% to 45% Marginal Rate
SARS has clarified that withdrawals from the two-pot system will be subject to tax at marginal rates ranging from 18% to 45%, depending on the applicant’s income tax bracket.
Despite this clear taxation policy, SARS has discovered that some individuals have been deliberately understating their income to secure a lower tax rate on their withdrawals.
Over 213,000 Taxpayers Found Manipulating Income Data
SARS Commissioner Edward Kieswetter revealed that 213,654 individuals have been caught submitting incorrect taxable income information in an attempt to reduce their tax liability on withdrawals.
Kieswetter strongly warned taxpayers against tax evasion tactics, stating that penalties will be imposed on those who understate their income.
“If a taxpayer understates their income, they are intentionally involved in evading their tax obligation. A penalty will be imposed on taxpayers who have understated income. I wish to caution taxpayers to refrain from this unbecoming conduct that borders on criminality. There are real consequences for this behaviour,” Kieswetter said.
What Are the Consequences of Understating Income?
Taxpayers who intentionally misrepresent their income may face severe consequences, including:
- Financial Penalties: SARS imposes hefty fines for tax evasion, which could amount to significant sums.
- Legal Action: Individuals caught manipulating tax records may face criminal charges.
- Future Tax Scrutiny: Taxpayers flagged for dishonest tax practices may be subjected to closer audits and further investigations in the future.
Why the Two-Pot System Matters
The two-pot retirement system was introduced to provide more flexibility for individuals to access a portion of their retirement savings in times of financial need. However, the system is designed to ensure that South Africans still save for their long-term retirement goals.
While the system has provided much-needed financial relief to many, SARS remains committed to ensuring that withdrawals are processed fairly and that all tax obligations are met.
Conclusion
SARS has successfully processed over 2.4 million withdrawal applications under the two-pot system, with R43.42 billion already paid out. However, concerns have been raised over errors in applications, tax evasion tactics, and fraudulent income reporting.
Taxpayers are urged to comply with tax laws, verify their details, and avoid misrepresenting their income to prevent penalties and legal consequences.
SARS remains vigilant in its efforts to detect and penalize tax fraud, ensuring that the system is fair and transparent for all South Africans.