Tax and SARS knowledge base
Do I pay tax when transferring retirement savings between funds?
Do I pay tax when transferring retirement savings between funds?
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Direct answer
An approved retirement-fund transfer is not automatically a taxable cash withdrawal. However, it needs the correct SARS tax-directive and Recognition of Transfer process. SARS says that if the required confirmation of transfer is not submitted, the transfer can be deemed a cash withdrawal benefit and taxed accordingly.
The member should therefore confirm that the transaction is actually an approved transfer and ask both fund administrators to confirm the directive and Recognition of Transfer status.
What this means in practice
A job change or fund consolidation can involve money moving from one approved fund to another. A transfer is not the same as a benefit paid to your bank account. The fund type, reason for the transaction, member status and, since the two-pot system, the component information can all be relevant.
Your administrator will normally drive the formal process. The transferring fund requests the relevant directive, and the receiving fund confirms that it received the amount through the Recognition of Transfer process. You should not try to submit the form yourself. Your role is to provide accurate personal information, respond to the administrator's requests and keep the evidence.
If there is a delay, ask precise questions. Request the directive reference, the date money left the transferring fund, the date it reached the receiving fund, the expected Recognition of Transfer submission date and confirmation once SARS accepts it. Keep an answer in writing, especially if your ITR12 is later rejected or prepopulated with a benefit you did not expect.
Step-by-step
- Confirm the transaction type.
Ask the administrator to state whether the transaction is a transfer or a cash withdrawal. Keep the transfer instruction and benefit quotation.
- Check the receiving fund details.
Verify your name, identity number, tax number and member number. Incorrect data can cause directive or transfer-recognition failures.
- Request directive information.
Ask the transferring administrator for the SARS directive reference and the reason selected on the application. Do not assume a document headed “tax directive” means tax has been charged.
- Ask about Recognition of Transfer.
Ask the receiving administrator when it will submit the ROT confirmation and how it will tell you that the process has completed.
- Retain both fund statements.
Keep the closing statement from the old fund and opening or receipt statement from the new fund. Compare the transferred amount and component details.
- Reconcile the ITR12 later.
Check the transfer information in eFiling. If a return is rejected because a matching ROT is missing, contact the receiving fund and refresh eFiling only after confirmation.
Documents and records to keep
- Transfer instruction and benefit quote.
- Directive reference and administrator correspondence.
- Closing and receiving fund statements.
- Recognition of Transfer confirmation.
- Tax certificate, ITR12 and ITA34.
Important limits and exceptions
Not every move between financial products is an approved retirement-fund transfer. A cash payment, resignation benefit, divorce transfer, annuity purchase and two-pot transaction can follow different processes. Do not rely on a general “tax-free transfer” description without the formal records.
SARS guidance notes that the legislation prevails if guidance conflicts. Fund rules and the correct directive reason are material, particularly where the transaction includes different two-pot components.
When to get tailored advice
Get advice if a transfer is large, crosses fund types, follows a divorce or retirement event, includes a cash amount, or produces an unexpected certificate. TaxProof can help prepare the timeline and document trail for your administrator or practitioner.
Related TaxProof guides
- Retirement transfer ROT ITR12 delay
- Why is my retirement transfer delaying the processing of my SARS return? (B05-IND-010)