Withdrew from your two-pot? You might receive little to no tax refund
· Citizen
South Africa introduced the two-pot retirement system to help people access part of their retirement savings before retirement age, while keeping the rest for retirement. It can be a helpful system, but it comes with tax rules that can surprise some people.
With the tax season upon us, some individuals who have already withdrawn from the two-pot retirement system in the current financial year have received their auto-assessments from the South African Revenue Service (Sars) showing little refunds, while some got no refunds at all.
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Filing for tax return after two-pot withdrawal
TaxTim‘s Nicci Courtney-Clarke said individuals who withdrew from their two-pot systems in the current tax year need to include the details of the withdrawal in their tax return.
“The fund should have issued you an IRP5/IT3a tax certificate which reflects the withdrawal amount (source code 3926), related tax as well as the tax directive number issued by Sars,” she said.
“This tax certificate must be included in your annual tax return. If you have not received this IRP5/IT3a then contact the fund administrator to request it.
“You might be surprised when you file your tax return and find out you owe Sars money.”
Tax rules when withdrawing from two-pot system
She highlighted that when a taxpayer makes a withdrawal from the savings pot, their fund will apply for a tax directive from Sars which will show how much tax must be deducted before funds are paid to the individual.
The fund administrator typically includes their latest taxable income in the tax directive application to Sars. They get this amount from the individual’s most recent IRP5 or their latest tax assessment.
“Your savings pot withdrawal is treated like income by Sars, which means the amount you withdraw is added to your annual income. You are taxed on it using the same tax rates as your salary or other income,” she added.
“But here’s the catch: Sars might not take enough tax up front when you withdraw.”
2 reasons why you might have to pay when you file
Courtney-Clarke said there are two reason when taxpayers might find out they owe the tax agency money when they file for their tax returns.
- Not enough PAYE was withheld on the savings pot withdrawal
The retirement fund may have withheld only a small amount of tax, or even none at all, especially if your income is normally below the tax threshold.
“This would happen when the taxable income on your tax directive is lower than what you actually earned. Sars expects the correct tax on your total income, so they calculate the extra you owe when you file your tax return.”
- Your total income pushed you into a higher tax bracket
The withdrawal may have moved you into a higher tax bracket, meaning your total income is taxed at a higher rate.
“Since your employer and the fund didn’t withhold enough tax based on the combined income, you have to make up the difference when you submit your tax return.”
Auto-assessments in 2026
Sars’ 2026 tax season is off to a good start with the tax agency having released at least R8 billion during the first three days of the auto-assessments.
The tax agency said on 2 July 2026 that more than 1.9 million taxpayers had been auto-assessed by the end of the first day of the tax season.
“The improvements form part of Sars’s commitment to excellent service and its vision to build a smart, modern Sars with unquestionable integrity. Sars aims to give clarity and certainty, and to make it easy for taxpayers to comply with their obligations,” the revenue collector said.
The tax agency said it would have assessed at least six million individuals by the end of 12 July 2026.