The National Treasury and the South African Revenue Service (SARS) are seeking public comment into the 2025 draft Revenue Laws Amendment Bill (2025 draft RLAB).
“This draft tax bill contains tax proposals that will give optionality for the funds to select whichever approach was communicated to their members and outlined in funds rules,” National Treasury said in a statement.
According to Treasury, the 2024 Revenue Laws Amendment Bill provides for any individual who was a member of a provident fund or provident preservation fund and was 55 years or older on 1 March 2021, to remain in the same fund, unless the member chooses to contribute to the 'savings component' within 12 months after 1 September 2024.
If the member elects to opt in, a one-time seeding amount of 10% of the value of the vested component will be calculated and the date of seeding will be the last day of the month in which the election is made, but capped at R30,000.
The seeding amount is then allocated from the vested component to the savings component on the last day of the month in which the election is made.
However, current legislation specifies that for provident fund and provident preservation fund members who were 55 or older on 1 March 2021, and choose to opt-in to benefit from the two-pot retirement system, the seeding amount must be calculated based on the value of their vested component as of 31 August 2024.
“It has come to Government’s attention that a number of funds drafted their rules to refer to 31 August 2024, and communicated this date to fund members, and as a result, have done the seeding calculation as of 31 August 2024 for those members who have already opted in.
Therefore, this has created an anomaly for funds as two versions have been communicated to their members and incorporated into the fund’s rules, i.e., due to the anomaly, for some members the seeding calculation was done on 31 August 2024, and for others on the last day of the month the member elected to opt-in.”
In addition, the current rules, effective from 1 September 2024, do not require for provident preservation members who were 55 or older on 1 March 2021, to stay in the same fund.
“A change to the legislation is required to give clarity to retirement fund members and administrators regarding the timing aspect of the seeding amount calculation. It is proposed that, for members of provident funds and provident preservation funds who were 55 years old on 1 March 2021, the seeding date and calculation method allows for some level of flexibility.
“This proposal will allow for alignment between the law and fund rules, as communicated to retirement fund members,” explained Treasury.
The draft tax bill will be tabled by the Minister, in Parliament, during the 2025 Budget Review, after taking into account public comments and recommendations.
The 2025 draft tax bill, the accompanying draft Explanatory Memoranda containing a comprehensive description of the proposed tax amendments contained in the 2025 draft RLAB can be found on the National Treasury (www.treasury.gov.za) and SARS (www.sars.gov.za) websites.
The due date for public comments on the 2025 draft tax bill is on 17 January 2025.
Written comments can be sent to 2025AnnexCProp@treasury.gov.za and SARS at acollins@sars.gov.za. -SAnews.gov.za
