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Thread: Tax directive and tax brackets

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    Tax directive and tax brackets

    Hi,

    Say an individual earned a salary of R450 000 for the tax year ended 2012 and was retrenched in this year as well. He received a lump sum payment of R100 000 as a retrenchment package and received a Tax Directive stating that no tax is payable on the lump sum.

    Is it correct to add the R100,000 to the R450,000 to get to an annual income of R550,000 to work out the tax bracket that the individual falls into or does the fact that a tax directive was received for the amount mean that the R100,000 would not move the individual into a higher tax bracket?

    Please advise.

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    As far as I know the R100,000 is exempt from tax and is therefore not included. The exemption is R300,000, so anything more than that would be included. That's my understanding of it anyway.

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    I agree with Clive. The Income Tax Act provides for separate tables (brackets) for retirement and severance benefits. These lump sums are taxed separately and is not added to your salary or normal income and cannot put you in a higher tax bracket.

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