HomeHome SearchSearch MenuMenu Our productsOur products

What exactly are lump sum payments?

by , 28 January 2014
Have you heard of lump sum payments? If not, read on to find out what they are and how they affect you.

Have no idea what lump sum payments are?

Here's what you need to know about lump sum payments

The Practical Tax Loose Leaf Service explains that for tax purposes, only certain amounts are recognised as lump sum payments that enjoy special treatment, exemptions and deductions.

  • A lump sum payment is an amount received by an individual under the following circumstances:
  • Gratuities (golden handshakes and retrenchment) and similar awards (including voluntary awards) you are paid for relinquishment, termination, loss, repudiation, cancellation or variation of your office or employment or of your appointment to any office or employment.
  • Resignation from a fund: A lump sum you receive from a pension, provident or Retirement Annuity.
  • Fund (Road Accident Fund) when you withdraw from a fund or the fund is wound up.
  • Retirement: A lump sum you receive from pension, provident or RAF is when you retire.
  • Death: A lump sum you receive from a pension, provident or RAF when you die.
  • Retirement from public service: A lump sum you receive from a pension, provident or RAF when you retire from public service.
  • Antedated (backdated) salary or pension pay outs
  • Qualifying CCMA and labour dispute awards

In each of the above circumstances an employer or retirement funding company must submit application forms (selected according to the nature of the lump sum) to SARS before paying the lump sum.

Here are the applications forms you must submit to SARS before paying the lump sum

Application forms:

  • For gratuity or other miscellaneous lump sum amounts, submit the IRP 3(a)
  • For resignation, withdrawal from, or winding up of pension/provident or RAF, submit Form B
  • On retirement (payment from RAF), submit Form C
  • On retirement (payment from pension or provident fund) submit Form A and D
  • On retirement from public service, submit Form E

You can find these forms on the SARS website.

Now that you know what lump sum payments are, next time we'll tell you about how you can benefit from them.

Enjoyed this article? Subscribe to receive these free articles in your inbox daily.

 

Vote article

What exactly are lump sum payments?
Rating:
Note: 5 of 1 vote


Related articles




Related articles



Related Products