Thank you for your question! It\u2019s an excellent one because it affects many people who are retired or approaching retirement.<\/p>\n
In summary, based on the calculations and methodology used, the tax of roughly R51 000 on the R142 000 lump sum is correct, and your wife did make use of the R500 000 tax-free portion available to her.<\/p>\n
Before diving in, I\u2019ve made an assumption that the R142 000 annuity you mentioned is the one-third lump sum from another retirement fund your wife was invested in.<\/p>\n
Based on that, here\u2019s an outline of how the tax works.<\/p>\n
Understanding aggregated lump sum benefits<\/strong><\/p>\n What you\u2019re dealing with is called aggregation of lump sum benefits.<\/p>\n This happens when someone who is retiring (or accessing a lump sum benefit now) has already taken a lump sum benefit in the past.<\/p>\n Read: What many investors don\u2019t know about their retirement funds \u2013 but should<\/p>\n Sars combines these amounts to calculate the correct tax liability on the current lump sum.<\/p>\n In simple terms: tax on lump sum benefits is cumulative. It considers all previous lump sums received under the current tax rules.<\/p>\n What Sars looks at<\/strong><\/p>\n Sars only includes lump sums taken after certain key dates \u2013 these dates correspond to major changes in how lump sums are taxed:<\/p>\n These dates matter because they mark changes in the Income Tax Act that affect how benefits are taxed. Anything before these dates falls under older rules and isn\u2019t included in the current calculation.<\/p>\n How the tax was calculated in your wife\u2019s case<\/strong><\/p>\n To show how Sars arrived at the R51 120 tax, here\u2019s a step-by-step breakdown:<\/p>\n Step 1: Add all relevant lump sums together<\/strong><\/p>\n Step 2: Calculate tax on this total using the retirement lump-sum tax table<\/strong><\/p>\n Because the total exceeds R1\u00a0050 000, the highest tax bracket applies:<\/p>\n Tax = R130 500 + [36% \u00d7 (R4 642 000 \u2013 R1\u00a0050 000)] Step 3: Calculate tax on the previous lump sum only<\/strong><\/p>\n Previous lump sum (resignation 2022): R4\u00a0500 000<\/p>\n Step 4: Apply the same tax table to that amount<\/strong><\/p>\n Tax = R130 500 + [36% \u00d7 (R4\u00a0500 000 \u2013 R1\u00a0050 000)] Step 5: Subtract Step 4 from Step 2<\/strong><\/p>\n This gives the tax payable on the current lump sum:<\/p>\n R1\u00a0423 620 \u2013 R1\u00a0372 500 = R51 120<\/p>\n So, Sars deducts R51 120 from the R142 000 lump sum your wife withdrew at age 55, which aligns with the tax figure provided in your question.<\/p>\n Read: Although it may not be obvious at first glance, the calculation does include the R500 000 tax-free portion your wife qualified for in 2022. It\u2019s just that once the lumps sums are aggregated, the tax-free portion is absorbed into the cumulative calculation rather than appearing as a separate line item.<\/p>\n I hope this provides the clarity you are looking for. For further information on this, we recommend consulting with a Certified Financial Planner \u00ae who can assist in providing you with appropriate advice around the tax consequences when exiting retirement and investment vehicles.<\/p>\n<\/p><\/div>\n\n
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![\"\"](\"https:\/\/www.moneyweb.co.za\/wp-content\/uploads\/2025\/12\/1a-555x162.jpg\")
<\/p>\n
= R130 500 + (36% \u00d7 R3\u00a0592 000)
= R130 500 + R1\u00a0293 120
= R1\u00a0423 620<\/p>\n![\"\"](\"https:\/\/www.moneyweb.co.za\/wp-content\/uploads\/2025\/12\/2a-555x162.jpg\")
<\/p>\n
= R130 500 + (36% \u00d7 R3\u00a0450 000)
= R130 500 + R1\u00a0242 000
= R1\u00a0372 500<\/p>\n
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