Page 370 - SAIT Compendium 2016 Volume1

Seventh Schedule INCOME TAX ACT 58 OF 1962 Seventh Schedule
‘de ned bene t component’ means a bene t or part of a bene t receivable from a pension fund, provident fund or retirement annuity fund by a member of that fund or a dependant or nominee of that member other than a de ned contribution component or underpin component of a fund;
‘de ned contribution component’ means a bene t or part of a bene t receivable from a pension fund, provident fund or retirement annuity fund—
(a) where the interest of each member in the fund in respect of that bene t has a value equal to the value of—
(i) the contributions paid by the member and by the employer in terms of the rules of the fund that determine the rates of both their contributions at a xed rate;
(iii) plus any amount credited to the member’s individual account upon—
(A) the commencement of the member’s membership of the fund;
(B) the conversion of the component of the fund to which the member belongs from a de ned bene t
component to a de ned contribution component; or
(C) the amalgamation of that fund with any other fund, if any, other than amounts taken into account in terms
of subparagraph (iv);
(iv) plus any other amounts lawfully permitted, credited to or debited from the member’s individual account, if any, as increased or decreased by fund return; or
(b) which consists of a risk bene t provided by the fund directly or indirectly for the bene t of a member of the fund if the risk bene t is provided solely by means of a policy of insurance;
‘fund member category’ in relation to members of a pension fund, provident fund or retirement annuity fund, means any group of members in respect of whom, in terms of the rules of the fund—
(a) the employers of those members and those members must respectively make a contribution to that fund in an
amount in respect of retirement funding income at the same xed rate; and
(b) the determination of the value of the bene ts of the members referred to in paragraph (a) and the determination of
the entitlement of those members to those bene ts are made according to the same method;
‘fund member category factor’ means the fund member category factor contemplated in subparagraph (4); ‘fund return’, in relation to—
(a) the assets of a fund, means any income (received or accrued) and capital gains and losses (realised or unrealised) earned on the assets of the fund, net of expenses and tax charges, associated with the acquisition, holding or disposal of assets; or
(b) any portion of the assets of a fund if the assets are separately identi able, means any income (received or accrued) and capital gains and losses (realised or unrealised) earned on those assets, net of expenses and tax charges associated
with the acquisition, holding or disposal of assets; or
(c) the assets of a fund, to the extent that those assets consist of long-term policies which are ‘fund member policies’ as
de ned in Part 5 of the Regulations under the Long-term Insurance Act means the ‘growth rate’ (as de ned in those
Regulations) applicable to those policies, as determined in accordance with those Regulations;
‘member’ means in relation to a pension, provident or retirement annuity fund, any member or former member of that fund but does not include any member or former member or person who has received all the bene ts which may be
due to them from the fund and whose membership has thereafter been terminated in accordance with rules of the fund; ‘retirement-funding income’ means—
(a) in relation to any employee or the holder of an of ce (including a member of a body of persons whether or not established by or in terms of any law) who in respect of his or her employment derives any income constituting remuneration as de ned in paragraph 1 of the Fourth Schedule and who is a member of or, as an employee, contributes to a pension fund or provident fund established for the bene t of employees of the employer from whom such income is derived, that part of the employee’s said income as is taken into account in the determination of the contributions made by the employer for the bene t of the employee to such pension fund or provident fund in terms of the rules of the fund; or
(b) in relation to a partner in a partnership (other than a partner contemplated in paragraph (a)) that part of the partner’s income from the partnership in the form of the partner’s share of pro ts as is taken into account in the determination of the contributions made by the partnership for the bene t of the partner to a pension fund or provident fund in terms of the rules of the fund: Provided that for the purposes of this de nition a partner in a partnership must be deemed to be an employee of the partnership and a partnership must be deemed to be the employer of the partners in that partnership;
‘risk bene t’ means a bene t payable by the fund in respect of the death or permanent disablement of a member to that member or to a dependant or nominee of that member; and
‘underpin component’ means a bene t receivable from a pension fund, provident fund or retirement annuity fund the value of which bene t, in terms of the rules of the fund, is the greater of the amount of a de ned contribution component or a de ned bene t component other than a risk bene t.
(2) The cash equivalent of the value of the bene t contemplated in paragraph 2 (l), where the bene ts payable to members in respect of a fund member category of a pension, provident or retirement annuity fund consists solely of de ned contribution components, is the value of the amount contributed by the employer for the bene t of an employee who is a member of that fund.
(3) Where the bene ts payable to members in respect of a fund member category of a pension, provident or retirement annuity fund consists of components other than only de ned contribution components, the cash equivalent of the value of the bene t contemplated in paragraph 2 (l) is an amount that must be determined in accordance with the formula
X = (A × B) – C
in which formula—
(a) ‘X’ represents the amount to be determined;
(b) ‘A’ represents the fund member category factor in respect of the fund member category of which the employee is a member; (c) ‘B’ represents the amount of the retirement funding income of the employee;
[Item (c) substituted by s. 101 (1) of Taxation Laws Amendment Act, 2015 (‘employment’ after ‘retirement funding’ deleted) – date of commencement: 1 March 2016.]
362 SAIT CompendIum oF TAx LegISLATIon VoLume 1