Tax on a lump sum at retirement, death or severance.
Net lump sum
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Tax due
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Effective rate
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A separate tax table, just for retirement cash
When you retire and take part of your fund as a cash lump sum, that money is not taxed on the ordinary income scale. SARS uses a dedicated retirement lump-sum table that is far kinder, because it is meant to be a once-in-a-lifetime event. The same table applies to a lump sum paid on death or to a genuine severance benefit. This tool runs your lump sum through that table, accounts for any earlier lump sums you have taken, and shows the tax, the net cash, and the effective rate.
The four bands and the tax-free slice
The structure is a four-band sliding scale. The rates this calculator applies, following the SARS retirement benefits table, are zero on the first R550,000, then 18 percent, 27 percent, and a top rate of 36 percent on the highest amounts. That first zero band is the famous tax-free lump sum. Confirm the band edges and the R550,000 figure with SARS before you rely on them, since the table is set by legislation and can move.
- First R550,000: taxed at 0 percent
- R550,000 to R770,000: 18 percent
- R770,000 to R1,155,000: 27 percent
- Above R1,155,000: 36 percent
The aggregation rule that surprises people
The tax-free R550,000 is a lifetime allowance, not a fresh start at each retirement. SARS adds up every retirement, death, and severance lump sum you have ever received, applies the table to the running total, and then credits the tax already charged on the earlier ones. The practical effect is that a lump sum you took years ago uses up part of your zero band, so a later lump sum is taxed from a higher point on the scale. The tool models exactly this with a prior lump sums field, so leaving it at zero assumes this is your first.
Working through an R800,000 lump sum
Suppose you retire and take R800,000 in cash, with no previous lump sums. Using the rates this calculator applies, the first R550,000 is free, and only the R250,000 above it is taxed, all of it inside the 18 percent band. That is R45,000 of tax. Wait, the table gives R47,700 once you follow the exact band boundaries, because the second band runs from R550,000 to R770,000 at 18 percent and the slice from R770,000 to R800,000 falls into the 27 percent band.
| Slice of the lump sum | Rate | Tax |
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The effective rate shows how powerful the zero band is. The chart traces how the lump sum splits between the tax-free portion, the tax due, and the net cash received.
Who this is for, and one judgement call
This is the calculator to reach for at retirement, on the death of a fund member, or when a severance package is paid. The judgement most retirees face is how much to commute as cash at all. Taking the full tax-free R550,000 feels good, but money left inside a living annuity keeps growing tax-sheltered, while cash in hand is then exposed to tax on its future returns. Many people take only what they have an immediate use for and let the rest stay invested. If you have taken lump sums before, enter them so the calculator places this one correctly on the lifetime scale.
Does the tax-free amount reset if I move funds between providers?
No. Transferring from one fund to another is not a lump-sum withdrawal, so it does not use any of your tax-free amount and triggers no tax. The lifetime R550,000 is only consumed when cash is actually paid out to you on retirement, death, or severance. Switching providers or consolidating funds is tax-neutral.
Are severance and retrenchment payouts taxed on this same table?
A genuine retrenchment severance benefit uses this same retirement lump-sum table and shares the same lifetime tax-free amount, which is why an earlier retrenchment can reduce the tax-free portion of a later retirement lump sum. Notice pay, leave pay, and a normal bonus are different, taxed as ordinary income on the salary scale rather than on this table.