What is a tax directive?

Question:

Hi, if I am awaiting a pay out and the company that is to pay me out sends me a SMS stating that pay out is approved and that a tax directive is required, what does this mean and how much is to be paid towards this tax directive? Thanking you in advance Nicola

Answer:

Cash lump sums paid out by retirement funds are subject to either withdrawal or retirement lump sum tax (depending on whether you are simply withdrawing, or you are retiring). When a lump sum (any amount) is to be paid, the administrator must request a tax directive from SARS - previous lump sum payments have to be taken into account in applying the lump sum tax tables and SARS keeps a record of this. If you are withdrawing from a retirement fund for the first time, the first R22 500 of your cash lump sum is not taxed, further amounts (up to R600 000) are taxed at 18%.