Paragraph 2(1)(b)(iA) of the Second Schedule to the Income Tax Act provides that the portion of a member's pension interest assigned to a former spouse under a divorce order granted on or after 13 September 2007 under section 7(8)(a) of the Divorce Act, and due and payable on or after 1 March 2012, must be included in the non-member spouse's gross income. That amount is taxed in the non-member spouse's hands on the retirement fund lump sum withdrawal benefit tax table.
The Pension Funds Act was amended with effect from 1 September 2024 by inserting a definition for "pension interest". This definition extends beyond divorce orders granted under the Divorce Act to also cover court orders granted in respect of the division of assets of a marriage according to the tenets of a religion — which allows spouses in, for example, Muslim marriages to claim immediate deduction of their portion of a member's pension interest from a retirement fund.
The TLAA amends paragraph 2(1)(b)(iA) of the Second Schedule in alignment with this change, by specifically including pension interest assigned to a non-member spouse in terms of any order made by a court in respect of the division of assets of a marriage according to the tenets of a religion pursuant to its dissolution.
Effective: Deemed to have come into operation on 1 September 2024When the two-pot system was introduced, paragraph (c) of the proviso to the definition of "savings withdrawal benefit" set a minimum withdrawal amount of R2 000 and allowed a member who had already taken a savings withdrawal benefit (SWB) in a tax year to take a second SWB upon termination of fund membership if the remaining savings component balance was less than R2 000.
Section 1(1)(zG) of the Revenue Laws Second Amendment Act 24 of 2024 (effective 1 September 2024) removed the requirement that the member must already have made a withdrawal in that same tax year. This allowed both members who had taken a SWB and then had less than R2 000 remaining, and members who had never been able to make a SWB due to having less than R2 000 in their savings component, to withdraw the full balance on membership termination.
An unintended consequence remained: a member who had already taken a SWB, left employment in the same tax year, and had more than R2 000 remaining in their savings component could not withdraw that balance on exit. It had to remain in the fund until the following tax year before the member could take a second SWB and then terminate membership.
The TLAA removes the R2 000 de minimis entirely for members who terminate their fund membership. Paragraph (c) now permits a member to withdraw the total balance of their savings component on termination of fund membership, regardless of the balance amount or whether a SWB has already been taken from that fund in the same tax year.
The introduction to paragraph (g) of the definition of "savings component" in section 1 of the Income Tax Act permitted a nominee to elect to have the deceased member's interest in the savings component paid as a retirement lump sum under the Second Schedule. It did not, however, extend this election to a dependant.
This created the impression that if a dependant chose to receive the deceased member's savings component as a lump sum, it would be taxed as ordinary income rather than on the retirement fund lump sum benefit tax table. This was not consistent with paragraph 3 of the Second Schedule, which already allowed both a nominee and a dependant to elect whether to receive their allocated portion of a death benefit as a lump sum, an annuity, or a combination — with any lump sum taxed on the retirement fund lump sum benefit tax table.
The TLAA amends the introduction to paragraph (g) by adding the word "dependant". Read with subparagraph (ii), this confirms that both a nominee and a dependant may elect to have the deceased member's savings component paid as a lump sum, taxed on the retirement fund lump sum benefit tax table — consistently with the treatment of the other two components.
Effective: Deemed to have come into operation on 1 September 2024Before 1 September 2024, a preservation fund member had the right to make one withdrawal from their preservation fund before retirement. Following that withdrawal, the member could access the total remaining benefit as a pre-retirement withdrawal if they ceased to be a South African tax resident for three consecutive years.
The two-pot legislation gave preservation fund members access to their vested and retirement components on cessation of South African tax residency for an uninterrupted period of three years. This inadvertently removed the member's right to a withdrawal from the pre-1 September 2024 vested component without any waiting period, since the three-year cessation-of-residency requirement was now applied to access the vested component.
The TLAA amends paragraph (c)(ii)(bb)(A) in the definitions of both "pension preservation fund" and "provident preservation fund" to make clear that the three-year waiting period does not apply to:
This protects the member's vested pre-1 September 2024 rights. A preservation fund member may therefore make one withdrawal from their vested component before retirement. If the member later ceases to be a South African tax resident for three consecutive years, they may make a second withdrawal from the remaining vested component and also access the retirement component. Both withdrawals are taxed on the retirement fund lump sum withdrawal benefit tax table.
Effective: Comes into operation on 1 March 2026 and applies in respect of years of assessment commencing on or after that dateThe reference to "two-thirds of the member's interest in the vested component" in the calculation of the retirement de minimis across all fund definitions was identified as incorrect in JLAW IC 1 of 2026 (Revenue Laws Amendment Act No. 6 of 2025, paragraph 3B). When determining the one-third lump sum a member may take from their vested component on retirement, the T-day vested portion is calculated from the member's full vested component, not from two-thirds of it.
The TLAA corrects this by amending the definitions of all retirement fund types to replace "[two-thirds of] the member's interest in the vested component" with "the total member's interest in the vested component", so that the relevant part of each definition now reads:
Provided that in determining the value of the total member's interest in the vested component, an amount calculated as follows must not be taken into account—
This aligns the legislation with the calculation method SARS already applies when processing tax directives on retirement.
Paragraph (a) of the definition of "member's interest in the savings component" referenced paragraph (c) of the proviso to the definition of "savings component". That paragraph (c) — which provided that payments or transfers from a similar savings component to a pension preservation fund or provident preservation fund on or after 1 September 2024 are allocated to the savings component — was deleted by section 1(1)(zF) of the Revenue Laws Second Amendment Act 24 of 2024. The TLAA removes the now-redundant cross-reference from the definition of "member's interest in the savings component".
The reference to "individual contract policy basis" in the proviso to paragraph 6B of the Second Schedule is replaced with "individual policy contract basis". The change corrects the word order to align with the established descriptor of the concept.
Effective: Comes into operation on 1 March 2026 and applies in respect of years of assessment commencing on or after that date