Retrenchment Packages — Severance Tables, Leave Pay, and the IRP5

Split the package

A typical exit mixes notice pay, accrued leave, and a severance / retrenchment lump sum. Leave and notice are usually ordinary income. A qualifying severance benefit can be taxed on the retirement / retrenchment lump-sum table (with a directive). The IRP5 codes tell you which is which — not the HR email subject.

The directive

The employer or fund applies to SARS before paying certain lump sums. Outstanding tax debt can be deducted. The directive is not always the last word if other income changes the year.

Retirement pots

What happens to the pension or provident fund is a separate election (preserve, transfer, withdraw) with its own tax. Two-pot savings withdrawals are marginal-rate income (3926), not the severance table. Do not mash them together.

File the year you were paid

If you start a new job in the same year of assessment, both IRP5s belong on one return. Taxzi can help you list deposits. A practitioner should review a large package. Confirm lump-sum tables on sars.gov.za.

Questions

Is the whole retrenchment tax-free?

No. Parts may use a lump-sum table; leave and notice usually do not. Read the IRP5.

Should I accept auto-assessment after a package?

Only if every code and the second job (if any) are on the assessment. Usually you should open the return.