Two-pot savings and SARS – managing tax debt on withdrawals

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Thomas Lobban | Specialist | Tax Legal | Latita Africa | mail me |


Two-pot savings and South African Revenue Service (SARS) became a crucial topic when taxpayers realised they cannot access their savings without settling tax debts first.

South African taxpayers withdrawing from their two-pot savings must first settle any outstanding tax debt unless arrangements exist with SARS.

Understanding the two-pot savings and SARS

Taxpayers need to understand how two-pot withdrawals interact with tax debt to avoid unpleasant surprises. Reports reveal taxpayers attempting withdrawals sometimes receive nothing after SARS deducts outstanding amounts.

When a fund administrator processes a withdrawal, they request a tax directive from SARS. This directive specifies the tax to deduct and may include instructions to settle any outstanding tax debt.

How SARS handles two-pot savings withdrawals

If taxpayers arrange with SARS to defer or pay off their debt, only the withdrawal amount is taxed. Without such arrangements, taxpayers risk losing their savings entirely and remaining in debt. Arranging with SARS is crucial to reduce financial pressure and protect emergency funds.

Taxpayers can confirm tax debt in several ways. They receive letters of demand by mail or can check their eFiling profile online:

  • Click the “Tax Status” button and check under “Tax Compliance Status” for arrears.
  • Request a statement of account showing ageing arrears in 30-, 60-, 90-, or 120-day columns.
  • Review SARS correspondence for electronic demand letters.

Alternatively, they can inquire via the SARS call centre, USSD channel, or WhatsApp.

Navigating SARS payment arrangements

Taxpayers can settle tax debt through two options: payment deferral or debt compromise. A payment deferral allows monthly instalments or delayed settlement. A debt compromise lets taxpayers negotiate partial payment, with the remainder written off.

In both cases, taxpayers must prove inability to pay and meet SARS’ stringent requirements. SARS may decline requests, especially if taxpayers fail to present their cases adequately.

Simply pleading poverty won’t suffice. Taxpayers must approach SARS professionally, respecting its procedural and legal constraints. Consulting a tax professional, particularly one with legal expertise, significantly increases the chances of relief. Professional guidance ensures higher success rates when navigating these complex requests.


 



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