A recent court ruling has brought attention to a critical issue for South African taxpayers: the accessibility of retirement savings by SARS for tax debt recovery. This development marks a significant shift in how SARS can collect outstanding taxes, challenging the previous understanding that retirement funds were off-limits for such collection actions.

The authority granted by the Section 179 of the Tax Administration Act

The crux of this ruling lies in the Tax Administration Act (TAA), which empowers SARS to use various methods to recover unpaid taxes. This includes appointing third parties, such as banks and retirement fund administrators, to release funds from an individual’s accounts to cover outstanding tax liabilities. The court ruling further clarified that SARS’s collection powers under the TAA can override protections typically afforded to retirement savings under the Pension Funds Act (PFA).

What this means for taxpayers

This decision brings attention to the importance of maintaining good tax compliance, as individuals can no longer assume their retirement savings are entirely safeguarded from SARS’s collection efforts. In cases where substantial tax debts are left unpaid, SARS now has the legal authority to access those retirement savings.

SARS’ ITA88: Third-party payments explained

One critical element of this ruling is the concept of third-party payment orders, which allow SARS to directly access funds from a third party to settle a taxpayer’s outstanding tax debts. This method bypasses the individual and ensures SARS can recover owed amounts, even if the taxpayer is unwilling or unable to make payments.

Steps to take if you receive a third-party payment order

Upon receiving notification of a third-party payment order concerning your retirement savings or other financial assets, it is essential to act promptly:

• Reach out to SARS to clarify the situation and explore your options, as there may be opportunities for negotiation or deferral of payments.
• Additionally, consult a tax advisor or legal professional for expert guidance on managing the debt and safeguarding your funds.

Conclusion

This ruling serves as a reminder for taxpayers to remain compliant with their tax obligations and understand the consequences of non-payment. By staying on top of tax filings and payments, individuals can avoid unexpected financial difficulties in the form of drained retirement savings. Seeking professional advice when facing a third-party payment order is crucial in protecting one’s assets and finding a manageable resolution with SARS. So, it is important for all taxpayers to stay informed about their tax responsibilities and take necessary steps to fulfill them timely. In case of any difficulty or confusion, consulting with professionals can help navigate the process more efficiently. By being proactive and responsible when it comes to taxes, individuals can secure their financial future and avoid potential consequences from SARS.

FinGlobal: tax specialists for South Africans abroad

Unsure about the tax implications of living in another country? FinGlobal can assist. We can help you with clarifying your status as a South African tax resident and determining whether or not it’s in your best interest to maintain South African tax residency, or complete tax emigration to break your tax ties with SARS. We’re here to guide you on all aspects of expat tax compliance, providing expert assistance on your tax returns, tax clearance, tax refunds and more.

To find out how FinGlobal can streamline your tax affairs and ensure you’re always on the right side of the tax authorities, leave your contact details below and we’ll be in touch to discuss your unique situation.