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Retrenchment pay-out tax code

Posted 1 November 2012

During the 2012 tax year I received a retrenchment pay-out. It is reflected on my IRP5 with tax code 3907. According to the tax code definition I got off the SARS website 3907 is defined as: "Other lump sums (e.g. backdated salaries extended over previous tax years, not approved funds)."

Tax code 3901 is defined as: "Gratuities (retirement / retrenchment)."

Does it matter that the code seems to be incorrect on my IRP5, is there a tax implication?

TaxTim TaxTim says:
1 November 2012 at 13:24

It can make a difference as there are specific tax tables related to retrenchment payouts. On the bottom right had corner of your IRP5, is there a directive number? Also on the tax withheld section of the IPR5 is there an amount withheld for lump sums? It would be a good idea to consult with your employer about this in light of your research.

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