Question:
I left South Africa in 1996 as a South African resident temporarily abroad and have not been back since. I have taken out New Zealand citizenship and will not be returning to South Africa even though I have not formally emigrated. I have a paid up retirement annuity policy with a capital value of about R70 000 as my only asset in the South Africa.

I would like to cash it in and bring the funds to New Zealand after paying whatever tax is payable. I do not have a bank account in South Africa.

Is this now possible and how do I go about organizing this? How much tax, if any, is payable? I am 68 years old.

Answer:
With the recent legislative amendments, it has now become possible for a member of a retirement annuity fund to withdraw his or her benefit at any age if he or she emigrates. The benefit will be taxed as any withdrawal benefit from a pension/provident/preservation fund — an amount of R1800 is usually tax-free with the balance taxed at the taxpayer’s average rate of tax. The legislation is very clear, however, that such a person must have factually emigrated (i.e. gone through formal emigration procedures). Since you specifically mention that you have not in fact formally emigrated, this route is not available to you.

There is, however, another option available to you: you can simply retire from the retirement annuity. You do not mention whether you have retired from any retirement fund previously while still resident in South Africa, but this is a relevant factor as you will see later when it comes to taxation.

Legislation passed in 2007 makes it possible for members retiring from a retirement annuity which has an accumulated benefit that does not exceed R75 000 to take the full benefit in the form of a lump sum. This lump sum will then be taxed as all lump sums on retirement — that is according to a sliding scale introduced in 2007. This sliding scale allows for the first R300 000 of any lump sums to be free of tax with the balance then taxed at increasing increments. If you have, however, previously received tax-free amounts from retirement funds, the R300 000 will be reduced by those amounts.

It is therefore important to consider whether you may have retired from any retirement funds previously and received any tax-free amounts from these funds. Before 2007, the amount allowed to be taken tax-free was usually R120 000 — you would have to assess your own situation here, though. If you have utilised R120 000 as a tax-free concession from a retirement fund in the past you will still have the balance of R300 000 (i.e. R180 000) available now.

What does this all mean for you? It may be possible for you to retire from your retirement annuity, take the full R70 000 as a lump sum and also receive the full amount tax-free. I would advise you to contact the RA fund directly to ascertain how you need to go about putting the process in motion whilst you are in New Zealand.

The fact that you do not have a South African bank account may be problematic, though. It is likely that your fund will insist on paying the benefit into a South African bank account only — as is the case with most other policy benefits. You would have to discuss your situation and possible options with them.

If you have access to a Certified Financial Planner in South Africa he or she will obviously be in a position to facilitate the process for you and address any further queries that may arise. Good luck!

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