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by Liesl Winter
The name says it all: for a clean break after a divorce, pension funds monies should be paid out promptly.
Previously, payment to the non-member spouse of pension interest was made on the retirement of the member spouse. That could mean decades of non-clean break. The Pension Funds Amendment Act of 2007 created the clean break principle, and allowed payout either by way of a transfer to a pension fund in the non-member's name, which is tax free, or by withdrawal, which is subject to tax.
So far so good. But in 2009 the legislation regarding the date of payout changed. SARS were not uniform in applying the new tax tables and there were instances where both methods for calculating tax were used. Anyone who may be affected should be alert to correct calculation of tax on these payouts. The problem should be over by now, but then, the problem should not have arisen in the first place.
Crucial distinctions arise according to (a) whether the divorce order was granted before or after 13 September 2007, and (b) whether the date of payout was to be before or after 1 March 2009.
The Revenue Laws Amendment Act, which changed the tax implications, was only promulgated on 30 September 2009. Between 1st March 2009 and 30th September 2009 SARS used both the old and new systems, resulting in cases where either a refund or further tax may now be due.
Simply put, if you may be affected it would be a good idea to take professional advice.
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