ALL THINGS TAX RELATED
As part of our ongoing efforts to keep our pensioners informed, the EPPF would like to provide you with an update around certain tax-related changes which is being implemented in 2022, which may have an impact on you.
March is the start of the new tax year and in anticipation of queries relating to higher tax deductions, we include a few notes on the matter:
- For pensioners who retired mid tax year and are comparing their current month's tax with the previous year's tax may see an increase in the tax amount deducted. This is due to the fact that the previous year's tax was based on a few months (their annual income was for less than 12 months) and now from March 2022 the annual income is for the full 12 months. This results in a higher tax deduction and may even place the pensioner in a higher tax bracket.
- For those pensioners who were receiving a pension for 12 months in the previous year, will also see an increase in the tax deducted.
Remember that tax was calculated on the basis of:
Pension amount before increase X 10 months + Pension amount after increase x 2 months = annual income.
From March 2022 the calculation changes to:
Pension amount after increase x 12 = annual income.
Due to the pensioner increase received for a full 12 months the annual income will be higher and may place the pensioner in higher tax bracket hence the tax payable has increased.
Furthermore, please note that the Fund will be implementing the 2022/2023 tax rates as announced in the Budget Speech in the April 2022 payroll so pensioner tax deductions may also differ between March and April 2022. Remember, the Tax season runs from the beginning of March to the end of February each year.
SARS changes to tax deduction (PAYE) for pensioners earning taxable income from other sources in addition to their EPPF pension
Some pensioners in receipt of more than one source of income often end up accumulating a large tax debt which they need to pay to SARS at the end of the tax year due to insufficient tax having been deducted from their various monthly incomes during the tax year.
With reference to a SARS communication in January 2022, a new process is being implemented where an updated tax rate is provided to the EPPF for affected pensioners so that a more accurate tax deduction is applied to the EPPF pension. This will result in the tax deducted from the EPPF pension to be higher as it will take into account the pensioner’s other income sources as contained in the SARS tax system (SARS uses the latest data available). The updated (more accurate) tax rate will apply to affected pension payments from 1 March 2022 onwards. The EPPF is already in contact with those affected pensioners who have started to make use of this service.
How does this affect pensioners?
- This ONLY applies to pensioners who receive more than one source of taxable income from other sources, in addition to their EPPF pension i.e., income sources as contained in the SARS tax system. Pensioners are required to ensure that their records with SARS are accurate and kept up to date.
- SARS providing a more accurate PAYE deduction amount may mean that the tax deduction will increase resulting in some pensioners receiving less pension (after deductions), but in return, you are unlikely to be faced with an unexpected tax bill at year-end.
- Action is only required from those pensioners who DO NOT want the Fund to deduct the updated (more accurate tax deduction) amount as provided by SARS.
- If this is the case, you must request the Fund in writing (email: Tax@eppf.co.za), to continue to deduct the current/normal PAYE from your pension and NOT the more accurate PAYE deduction as determined by SARS. This may result in you having to settle a tax debt at the end of the tax year.
- The rate provided by SARS is valid for the whole tax year, as such pensioners have until the 16th of March 2022 to opt-out, failing which the default SARS tax rate deduction will apply.
For any further enquiries, or further clarity on the various tax changes, please contact our Call Centre 0800 11 45 48 or firstname.lastname@example.org. Alternatively, you may contact any of our regional Retirement Fund Consultants. Click here to access their contact details.
Eskom Pension and Provident Fund