i What this calculator does
A severance benefit is taxed on its own table rather than at your marginal rate, and the first portion is exempt. That table is shared across your lifetime with retirement lump sums, so a previous withdrawal reduces what is left.
Many people receive a retrenchment package and immediately consider using it to start trading. Knowing the after-tax figure first, and how much of the lifetime exemption it consumes, changes that decision.
This calculator is for educational purposes only. Results are estimates and may vary depending on market conditions, spreads, commissions, platform settings, and exchange rates. It should not be considered financial advice.
Frequently asked questions
Is a retrenchment package taxed at my marginal rate?
Not the severance benefit itself. It is taxed on the retirement and severance lump sum table, where the first R550,000 across your lifetime is taxed at zero. Leave pay and notice pay are different: they are ordinary income taxed at your marginal rate.
Does the R550,000 reset each time?
No. It is a lifetime amount shared across severance benefits and retirement lump sums. A withdrawal taken years ago reduces what is available now, which is why the calculator asks for prior lump sums.
What counts as a qualifying severance benefit?
Broadly, a payment on retrenchment where the employer ceases operations or reduces staff, and where you did not hold more than 5% of the company. A resignation payout does not qualify and is taxed as ordinary income.
Should I use a retrenchment package to start trading?
That is a personal decision, but the arithmetic is worth seeing first. The package is often the largest lump sum someone will hold, it is not replaceable, and the loss rates published by regulated CFD brokers are high. Most financial planning guidance puts an emergency fund and debt clearance ahead of any market exposure.
Is the two-pot withdrawal counted in the same lifetime total?
Withdrawals from the savings component are taxed as ordinary income at your marginal rate rather than on the lump sum table, so they are treated differently. Retirement lump sums taken at retirement do count toward the same cumulative total.
Do I need to declare it if the employer already deducted tax?
Yes. The payment appears on your IRP5 and must be reflected on your return. SARS issues a tax directive for the severance benefit, and the amount deducted is credited against your assessment.
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