Chris Brits, CEO of EBnet (The Employee Benefits Network)
The National Treasury and SARS have released the revised 2023 Draft Revenue Laws Amendment Bill and 2023 Draft Revenue Administration and Pension Laws Amendment Bill for public review and feedback.
These draft bills include the necessary legal changes to implement the initial phase of the “two-pot” retirement system.
They also consider the public comments received on the 2022 Draft Revenue Laws Amendment Bill, which was published on July 29, 2022. The revised bills also incorporate a change in terminology, replacing the word “pot” with “component,” which will be formally introduced by the Minister in Parliament. However, in everyday language, the term “pot” is still used to describe the reform itself.
The revised 2023 Draft Revenue Laws Amendment Bill includes the following important tax proposals mentioned in Chapter 4 of the 2023 Budget Review:
- Implementation date of the “two-pot” retirement system: The proposed effective date for the legislative amendments related to the “two-pot” retirement system is March 1, 2024.
- Proposal for seed capital: This proposal allows retirement fund members to access a portion of their available balance in the fund on the implementation date of the “two-pot” retirement system (March 1, 2024). To minimize liquidity issues, the seed capital will be calculated as ten percent of the accumulated benefit in the “vested component” as of February 29, 2024, limited to a maximum of R25,000, whichever is lower. It’s important to note that when a member withdraws the seed capital, it will be subject to the regular tax rates applicable to the member.
- Equitable treatment of defined benefit funds: Defined benefit funds calculate retirement benefits using a predefined formula rather than the member’s contributions. To ensure fairness, the revised draft bill proposes amendments that allow defined benefit funds to calculate one-third of the contributions to the “savings component” based on one-third of the member’s pensionable service increase. Additionally, two-thirds of the contributions to the “retirement component” will be based on two-thirds of the member’s pensionable service increase. These changes will come into effect on March 1, 2024.
The due date for public comments
National Treasury invites comments in writing on the revised 2023 Draft Revenue Laws Amendment Bill, the Draft Explanatory Memorandum on the Draft Revenue Laws Amendment Bill, 2023 Draft Revenue Administration and Pension Laws Amendment Bill and the Draft Memorandum on the objects of the Draft Revenue Administration and Pension Laws Amendment Bill.
Written comments to be sent to the National Treasury’s depository at 2023AnnexCProp@treasury.gov.za and SARS at email@example.com by close of business on 15 July 2023.
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