Taxation of divorce order amount

Transcription

1 Hettie Joubert Momentum BenefitsAtWork

2 Divorce Act Section 7(7) Pension interest Section 7(8) Pension Funds Act Section 37D Order of deductions Time periods Interest payable to non-member spouse Preservation funds Divorce order binding on the fund Division of pension interest Identification of Fund Fund ordered to pay Suggested wording for binding order Taxation of divorce order amount

3

4 Section 7(7): pension interests deemed part of divorce assets Section 7(8): Court MAY grant order that any part of pension interest of member due to NMS must be paid by fund to NMS take previous divorce orders into account after 1/11/1984: only in community of property when pension benefits accrue iro member Registrar to notify fund: make endorsement + administrator sends registrar: written proof of endorsement - within one month of receipt of notification

5 Retirement annuity fund the total amount of the member s contributions to the fund up to the date of the divorce, together with a total amount of annual simple interest on those contributions up to that date, calculated at the rate of 15,5% Pension fund the benefits to which the member would have been entitled in terms of the rules of the fund if his membership of the fund would have been terminated on the date of the divorce on account of his resignation from his office Must be member on date of divorce Member already became entitled to benefits + has already left his employment before the date of the divorce: no pension interest Pension interest which has not yet accrued - claim under section 7 of Divorce Act Pension interest which has already accrued and been converted pension benefit - accrued right forms part of joint estate

6 Order or deductions Time periods Interest Preservation fund Home loan / guarantee Maintenance order 45 days: fund requests NMS to make election <120 days: NMS informs fund of election + details of how to make payment / details of transferee fund If NMS elects: fund pays / transfers < 60 days from being informed Fund return from election / expiry of 120 day period Pension interest = benefit member would have been entitled to if membership terminated on date of divorce If NMS does not elect: fund pays directly to NMS < 30 days from expiry of the 120 day period Divorce order No instruction: retains amount + fund return in fund until it gets details from member, NMS / any other person

7 1. Division of pension interest amount certain / easily ascertainable % of provident interest / pension fund 100% tax to come off first 2. Identification of fund named / identifiable name of administrator / broker 3. Fund ordered to pay member ordered to pay no party ordered to pay refer to Divorce Act or PFA

8 Sandy is entitled to 50% of John s pension interest in the ABC Provident Fund. The ABC Provident Fund is ordered to pay this amount to Sandy

9 Date of divorce order Prior to 13 September September October November February 2009 On/after 1 March 2009 Who bears the tax? Deduction prior to 1 Member March 2009 Deduction on/after 1 Non-member spouse March 2009* Deduction prior to 1 Member March 2009 Deduction on/after 1 Non-member spouse March 2009 Election prior to Member 1 March 2009 Election on/after 1 Non-member spouse March 2009 Non-member spouse

10 Questions?

11 Married out of community of property on 12 May Divorce order 13 March Sent to Fund on 15 April 2008 with request to pay into bank account. Order: In terms of the Divorce Act 70/1979, Defendant s pension interest is deemed part of his assets. Defendant is a member of a pension/provident fund, the ABC Provident Fund (hereinafter referred to as the fund ) and has a pension interest as defined in Section 1 of Act 70 of 1979 (as amended). The parties agree that R (three hundred thousand rand) of Defendant s pension interest in the fund is due and assigned to Plaintiff. Plaintiff shall be liable for all/any tax due and payable on the R payable to her by the fund, if applicable. The fund is ordered, directed and authorized to pay the amount of R (three hundred thousand rand) of Defendant s pension interest directly to Plaintiff, into such account or Retirement fund or policy as nominated by her, within 90 days of divorce.

12 Married in community of property on 8 September Divorce order 12 December Sent to Fund on 5 January Order: 1. 50% of the defendant s pension interest in and to the 20/20 Provident Fund shall be assigned to the plaintiff and shall be paid by the relevant insurance company to the plaintiff when any benefits in terms of the policies become payable to the defendant. 2. An endorsement shall be made in the records of the aforesaid pension fund that one half of the defendant s said pension interest is so payable to the plaintiff. 3. The defendant shall pay interest to plaintiff on her share of the aforesaid pension interest with effect from the date of divorce to the date of payment at the rate at which the relevant insurance policies attract interest for that period.

13 Married in community of property on 14 February Divorce order 15 February Sent to Fund on 13 March Order: 1. The defendant is a member of the AH Pension Fund, a registered pension fund in terms of section 1 of the Divorce Act No 70 of 1979 as amended and which has its registered address at 54 West street, Pretoria. 2. The parties are entitled in terms of section 7(7)a and section 7(8)(a)(i) of the Divorce Act No. 79 of 1979 to one half share in their respective pension funds calculated from the date of divorce but payable when the benefit accrue to them. 3. The plaintiff shall ensure that an endorsement be made in the records of their respective pension funds that a half share in the Fund calculated at the date of divorce is payable to the respective parties when such benefit accrue.

14 Thankyou Ngiyabonga Dankie