SARS ‘technical error’ hits pension funds
Several taxpayers have alerted BusinessTech to a SARS technical issue impacting their tax assessments and retirement funds.
According to fund holders, numerous two-pot retirement lump sum filings and tax directives were incorrectely calculated between SARS and the controlling funds.
One of the funds hit by the issue, Alexforbes, confirmed to BusinessTech that it was aware of the errors and was working with SARS to resolve it.
Communication from the fund to members indicated that tax assessments by SARS incorrectly included transfers between retirement ‘sections’ as taxable events.
Transfers between the ‘pension section’ and the ‘provident section’ were incorrectly added as a taxable lumpsum in the tax assessment. This resulted in an outstanding tax balance owed to SARS.
Under the two-pot retirement system, withdrawals from the ‘savings pot’ would trigger a taxable event. However, the transfer of funds between the pots should not.
In addition, any retirement fund member who has reached the normal retirement age but has not elected to retire can transfer their retirement fund to another approved pension or provident fund without incurring any tax liability.
In short, tranfers that were not supposed to be taxed, were treated as taxable.
Alexforbes’ communication to affected clients noted that SARS had flagged the issue with multiple organisations and retirement funds and was prioritising resolving the error.
Speaking to BusinessTech, Alexforbes said it is working with SARS to resolve this “technical error”, stressing that only a limited number of clients were affected.
In its communication to clients, Alexforbes advised members not to submit their tax returns until the issue has been resolved.
For members that have already submitted their tax returns, the fund said these taxpayers should review their submitted details (the IT3a certificate issued by SARS) to ensure any transfer from the Pension Section to the Provident Section was not taxed.
For fund members who were auto-assessed, it recommended that a request for correction be submitted as soon as possible.
“With Auto Assessments, if corrections are not requested, the return is taken as finalised by SARS. That could result in a debt which SARS will then demand,” the group warned.
Taxpayers still have until 20 October to finalise their tax returns for the year, while there are multiple options available to correct or dispute a submitted assessment, including auto-assessments.
“We understand the inconvenience this may cause and confirm that the matter is receiving urgent attention. We will keep everyone informed as we make progress,” Alexforbes said.
Despite multiple attempts to reach SARS through official channels, the Revenue Service did not acknowledge the issue or provide feedback on timelines on when the issue is expected to be resolved.
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