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Retrenchment package
Severance pay uses the retirement lump sum table, with the first R550,000 tax free (shared with any retirement lump sums). Leave pay, notice pay and bonuses are taxed as normal income.
Package after taxR244,400Total tax R15,600
- Severance payR200,000
- Tax on severance-R0
- Leave, notice and bonusR60,000
- Tax on those-R15,600
- You receiveR244,400
How it works, with your numbers
- Severance: lump sum table on R200,000. The first R550,000 is tax free. Tax: R0.
- Leave, notice and bonus (R60,000) are added to your other income of R300,000 and taxed at your normal rates: R15,600 extra.
Good to know
- Severance only gets the lump sum table if you're retrenched for operational reasons (or are 55 or older), not if you resign or are dismissed.
- If you're out of work for the rest of the tax year, you may get some PAYE back when you file.
Uses SARS rates for the 2027 tax year. For illustration only. This is a guideline to help you plan, not tax advice: a registered tax practitioner must review and approve the final figures before you file.