Retirement fund lump sum and severance benefit table
Lump sum
Fixed tax
Rate on excess
R1 – R550 000
R 0
0%
R550 001 – R770 000
R 0
18%
R770 001 – R1 155 000
R 39 600
27%
R1 155 001 and above
R 143 550
36%
The first R550,000 is tax-free once in a lifetime: it is shared by all severance benefits and retirement lump sums you receive, so enter earlier ones under More options.
Severance benefits are lump sums from (or arranged by) your employer for the loss, termination or variation of your job. Normal salary and leave pay are taxed as remuneration, not under this table.
This is an estimate based on published rates, not tax or financial advice. Your payslip or assessment may differ. We are an independent site, not affiliated with any government agency.
Retirement fund lump sum benefits and severance benefits
Lump sum (R)
Tax
1 – 550,000
0%
550,001 – 770,000
18% of the amount above 550,000
770,001 – 1,155,000
39,600 + 27% of the amount above 770,000
1,155,001 and above
143,550 + 36% of the amount above 1,155,000
This table applies to severance benefits and to lump sums on retirement, death, retrenchment, ill health or termination at age 55 or older.
Retirement fund lump sum withdrawal benefits
Lump sum (R)
Tax
1 – 27,500
0%
27,501 – 726,000
18% of the amount above 27,500
726,001 – 1,089,000
125,730 + 27% of the amount above 726,000
1,089,001 and above
223,740 + 36% of the amount above 1,089,000
Worked example: R800,000 retrenchment package
Severance benefit R800,000, no earlier lump sums
The first R550,000 is tax-free and the next R220,000 is taxed at 18% (R39,600); the last R30,000 is taxed at 27% (R8,100). Total tax: R 47 700.
Tax on the lump sumR 47 700
You receive
R 752 300
Effective rate
5,96%
Earlier lump sums
SARS taxes each new lump sum as the tax on all lump sums received so far (including this one) minus the tax on the earlier ones alone. Enter earlier severance benefits and lump sums under More options to see how much of the tax-free band is left.
Questions people ask
Is severance pay taxed in South Africa?
Yes, but under the special lump sum table – the first R550,000 is tax-free, then 18%, 27% and 36%. A R800,000 severance package with no earlier lump sums carries R47,700 tax.
Is the R550,000 tax-free amount available more than once?
No. Severance benefits from March 2011, retirement lump sums from October 2007 and withdrawal lump sums from March 2009 are all added together, so earlier lump sums use up the tax-free band.
How is a withdrawal from my pension fund taxed?
Under the withdrawal table – only R27,500 is tax-free, then 18% up to R726,000, 27% up to R1,089,000 and 36% above.
What counts as a severance benefit?
A lump sum paid by or by arrangement with your employer because your employment is terminated, lost, cancelled or changed – for example a retrenchment package.
This is an estimate based on published rates, not tax or financial advice. Your payslip or assessment may differ. We are an independent site, not affiliated with any government agency. Read the full disclaimer.
