Resignation benefits

The taxation of your resignation or dismissal benefit is rather complex and depends on how you elect to receive your benefit. In this regard you have the following options:

  • You may elect to receive your benefit in cash
  • You may elect to transfer your benefit to your new Employer’s Fund or to a Preservation Fund or Retirement Annuity Fund
  • You may elect to preserve your benefit in the Fund until retirement.

Taxation of any cash benefit 

The tax-free amount in respect of cash withdrawal benefits is such portion of your original AIPF value that was subject to a zero tax rate (if applicable) plus R25 000.  However, the R25 000 is a 'once-off' cumulative value and once the limit of R25 000 is reached, tax-exemption on future withdrawals is not available.

Very important to also note that the tax-exempt amount of R25 000 reduces the once-off tax exempt amount of R500 000 at future retirement, death or retrenchment. Also note that the tax rates at withdrawal are higher in certain brackets than those applicable at retirement.  

Taxable Amount   Rate of Tax 
Up to R25 000 0% 
R25 000 to R660 000  18% of the taxable income exceeding R25 000
From R660 001 to R990 000 R114 300 plus 27% of the amount above R660 000 
R990 001 and above  R203 400 + 36% of the amount above R990 000

Taxation if you transfer to your new Employer or to a Preservation Fund or Retirement Annuity Fund

In this case no tax is payable at this time. You will, however, pay tax on the benefit you ultimately receive from your new Fund.