{"id":786083,"date":"2024-08-08T11:30:00","date_gmt":"2024-08-08T09:30:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=786083"},"modified":"2024-08-08T11:02:49","modified_gmt":"2024-08-08T09:02:49","slug":"last-minute-retirement-tax-changes-for-south-african-expats","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/786083\/last-minute-retirement-tax-changes-for-south-african-expats\/","title":{"rendered":"Last-minute retirement tax changes for South African expats"},"content":{"rendered":"\n<p>Tax experts have flagged tax changes for South African expats related to the two-pot retirement system, which have emerged in the latest proposals put out for public comment.<\/p>\n\n\n\n<p>Proposed amendments to the Income Tax Act concerning the two-pot retirement system, were announced by Treasury on 1 August 2024, <a href=\"https:\/\/businesstech.co.za\/news\/government\/785347\/big-tax-changes-for-south-africa-what-you-need-to-know\/\"><strong>along with a host of other bills.<\/strong><\/a><\/p>\n\n\n\n<p>Experts at Tax Consulting SA said that these changes, coming just a month before the system&#8217;s scheduled implementation, have introduced a few last-minute considerations for South Africans living abroad.<\/p>\n\n\n\n<p>The group noted that, under the current regime, only South African expatriates whose tax non-residency status has been confirmed by SARS for an uninterrupted period of three years, are able to withdraw their full retirement savings under the so-called &#8216;three-year lock-in&#8217; rule. <\/p>\n\n\n\n<p>The three-year lock-in rule operates independently of the general exceptions permitting early access to retirement funds, for instance, ceasing employment, it said.<\/p>\n\n\n\n<p>However, in a significant reform to South Africa&#8217;s retirement savings landscape, the two-pot retirement system will enter into operation from 1 September 2024, which changes things up.<\/p>\n\n\n\n<p>Under this system, retirement savings are divided into three (and not two) &#8220;pots&#8221;:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The vested pot, consisting of all accumulated retirement savings as at 31 August 2024;<\/li>\n\n\n\n<li>The savings pot, consisting of one-third of retirement contributions, post 1 September 2024; and<\/li>\n\n\n\n<li>The retirement pot, consisting of two-thirds of retirement contributions, post 1 September 2024.<\/li>\n<\/ul>\n\n\n\n<p>&#8220;Each pot is regulated by its own set of rules, which must be clearly understood by expatriates,&#8221; Tax Consulting said.<\/p>\n\n\n\n<p>The most notable change in the proposed amendments is the clarification of the operation of the three-year lock-in rule, pertaining to the withdrawal of retirement funds by expatriates.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>Vested Component<\/strong><\/p>\n\n\n\n<p>The vested component, made up of funds that a South African expatriate would have already accumulated up until 31 August 2024, is regulated under the current retirement regime. <\/p>\n\n\n\n<p>This component <strong>will continue to operate under existing fund rules<\/strong>.<\/p>\n\n\n\n<p>The proposed amendment, however, clarifies that <strong>the three-year lock-in rule will not apply to the vested pot of pension and provident funds<\/strong>.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>Retirement Component<\/strong><\/p>\n\n\n\n<p>Although this is a new introduction to the retirement regime under the two-pot system, this component will also be subject to the SARS non-residency requirements. <\/p>\n\n\n\n<p>Expatriates are therefore <strong>required to comply with the three-year lock-in rule<\/strong>, prior to being eligible to make an early withdrawal of the funds in the retirement pot.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>Savings Component<\/strong><\/p>\n\n\n\n<p>Expatriates are eligible to make one withdrawal from their savings pot per tax year, which funds are <strong>not subject to the three-year lock-in period<\/strong>. <\/p>\n\n\n\n<p>This is applicable to each separate retirement policy held by an expatriate. Where an expatriate has two policies, a withdrawal from each of the respective policies will be permitted in a tax year.<\/p>\n\n\n\n<p>This is a favourable incentive for expatriates, as they do not need to comply with the three-year lock-up rule before being eligible to withdraw from a savings component.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>Tax Consulting said that, in the rush to get ready for the implementation of the new two-pot retirement system, &#8220;it is clear that the \u2018cease to be a resident\u2019 requirements for early withdrawals from the retirement pot are here to stay&#8221;.<\/p>\n\n\n\n<p>&#8220;Many expatriates had already begun planning their financial strategies based on the initial announcement of the two-pot system. The last-minute amendments necessitate a reassessment of these plans to ensure they align with the new rules, particularly the operation of the three-year lock-in period,&#8221; it said.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>Read: <a href=\"https:\/\/businesstech.co.za\/news\/finance\/785743\/sars-clarifies-retirement-fund-tax-changes-for-2024\/\">SARS clarifies retirement fund tax changes for 2024<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>South Africans living abroad\u2014or who are planning to do so\u2014need to take note of last-minute tax changes that will impact their access to retirement funds.<\/p>\n","protected":false},"author":10,"featured_media":643817,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26],"class_list":["post-786083","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/786083","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=786083"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/786083\/revisions"}],"predecessor-version":[{"id":786086,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/786083\/revisions\/786086"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/643817"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=786083"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=786083"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=786083"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}