Two-Pot System: South Africans at Risk of Extra Tax Bills When Filing SARS Returns
- South Africans who withdrew from the Two-Pot retirement system could be in for a surprise this tax season
- Withdrawals are currently treated as taxable income and could push taxpayers into a higher tax bracket
- South Africans took to social media to weigh in on the news, sharing varied thoughts about the matter
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Byron Pillay, a Briefly News journalist, has dedicated a decade to reporting on the South African political landscape, crime, and social issues. He worked as a newspaper journalist for 10 years before transitioning to online.
South Africans who dipped into their retirement savings through the Two-Pot system last year could be in for a nasty surprise when they file their taxes this season, which officially opened on 1 July 2025.
Any amount withdrawn from the savings pot is counted as taxable income for that year. If the tax deducted at the time of withdrawal did not fully cover what was owed, taxpayers will need to make up the difference when they file their returns.
One of the bigger concerns is that adding a withdrawal to a person's annual income can push them into a higher tax bracket, meaning they end up paying more tax overall than they had anticipated.
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Why could South Africans be taxed?
Taxpayers who made a withdrawal must declare it in their annual tax return. To do so, they will need an IRP5/IT3a certificate from their fund administrator, which should reflect the withdrawal amount under source code 3926, along with the tax directive number and any related tax paid.
Anyone who has not yet received this document should contact their fund administrator directly.
“Your savings pot withdrawal is treated like income by SARS, which means the amount you withdraw is added to your annual income,” Nicci Courtney-Clarke from TaxTim explained.
South Africans react to the Two-Pot tax warning
Many South Africans have been vocal about their frustrations with the system and the tax implications tied to it.
@Sean Paul Maguire said:
"The problem is that it could push you into a different tax bracket, but we are not allowed to take enough for it to actually do that."
@Justice Baloyi wrote:
"Stop trying to threaten us. That money gets taxed immediately when you withdraw, so at the end of the year, there's nothing new as a result of the two-pot withdrawals."
@Steven Bailey suggested:
"The only reason that this dispensation was allowed was to gather more tax money to try and keep the government afloat."
@Sandra Smerdon Gajadhar Britz shared:
"Yes, we were taxed again, so it seems saving for old age is not worth it. Keep money in the mattress."
@Christina Engela warned:
"This two-pot thing is a bad idea. As the people drawing their savings early will find out when they retire one day and can't afford food, rent and electricity."
Finance Minister issues stern warning
Finance Minister Enoch Godongwana has issued a warning to citizens to use their retirement savings wisely.
The minister urged citizens not to waste their money when the two-pot retirement system came into effect.
Many ignored his warning and said they would spend their money however they wished, Briefly News previously reported.
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Source: Briefly News
