New Tax Directive Rules: What Fund Administrators Need to Know
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From 1 March 2026, two retirement thresholds quietly increased. Most clients do not know. Many practitioners have not checked. The SARS tax directive system, which automatically calculates the tax applicable to qualifying directive applications, was updated in April to reflect the new rules.
If you advise clients approaching retirement, work with fund administrators, or handle non-resident tax directives, these changes affect you right now.
What Is a Tax Directive and Why Do These Changes Matter?
A tax directive is an official instruction issued by SARS that tells a fund administrator, employer, or insurer how much employees' tax (PAYE) must be deducted from certain lump-sum payments before the money can legally be paid to the recipient. These directives are required for payments such as retirement fund withdrawals, retirement benefits, severance benefits, and certain other lump sums to ensure the correct amount of tax is withheld in accordance with South African tax legislation.
Because the tax directive system applies the tax rules in practice, any legislative changes must also be reflected in the directive process. If practitioners are unaware of these updates, they may give clients incorrect advice about the tax they can expect to pay or receive, or submit directive applications that are delayed, rejected, or require resubmission.
The changes introduced from April 2026 affect both the information that must be submitted and the way certain applications are processed. Understanding these updates will help practitioners prepare accurate applications, manage client expectations, and avoid unnecessary delays.
Here is everything that changed from April 2026 and what it means in practice.
Budget 2026: Two Retirement Thresholds Increased
These are the changes that will have the most direct impact on your clients.
The living annuity commutation threshold: R125,000 rises to R150,000
A living annuity can be fully commuted, meaning paid out as a lump sum rather than as a monthly income, if its value falls below a certain threshold. That threshold has increased from R125,000 to R150,000, effective 1 March 2026.
Importantly, this applies regardless of whether the annuitant has previously commuted part of the living annuity. So a client who commuted part of their living annuity in a prior year is not penalised. If the remaining value is now below R150,000, they can still take the full amount as a lump sum.
The de minimis retirement threshold: R247,500 rises to R360,000
This is the bigger change for most clients. When a member retires, if their total retirement fund value is at or below the de minimis threshold, they can take the entire amount as a lump sum without any portion being subject to the annuitisation rules. That threshold has increased from R247,500 to R360,000 from 1 March 2026.
📌Practical example:
A member retires with total retirement savings of R320,000. Under the previous R247,500 threshold, the member exceeded the de minimis limit and therefore could not commute the entire benefit as a lump sum. Under the new R360,000 threshold, the full amount falls below the limit, allowing the member to take the entire retirement benefit as a lump sum if they choose.
For clients with smaller retirement savings, this is genuinely good news worth sharing. It also removes a source of friction that previously made small-balance retirements administratively difficult for both funds and practitioners.
Recognition of Transfer (ROT): Cancellations Are Now Faster
When a retirement fund member moves their money from one approved fund to another, the receiving fund submits a Recognition of Transfer (ROT) to SARS. This is essentially SARS recognising that the transfer qualifies as a tax-neutral transfer under the Income Tax Act. It is a behind-the-scenes administrative step that fund administrators deal with regularly.
The problem was that cancelling an ROT, which becomes necessary when a transfer was submitted in error or the circumstances changed, was slow and frustrating. The fund had to attach supporting documents and the cancellation triggered a manual review case at SARS, adding days or weeks to the process.
From 17 April 2026, that has changed:
Supporting documents are no longer required for a cancellation request submitted on eFiling
Cancellations now process automatically, with no manual review case created
Multiple ROT cancellations can be submitted in one go using new bulk cancellation functionality
Fund administrators can now also view the details of ROT reminders sent by SARS, making it easier to track and manage outstanding transfers.
📌 New eFiling Tax Directive Report
SARS has also introduced a new report on eFiling that displays tax directives previously issued through the platform. This makes it easier for fund administrators to retrieve historical directives and manage their records.
This matters to practitioners because stuck ROT cancellations often held up downstream processes for clients. If you have fund administrator clients who were regularly frustrated by this, the bottleneck is gone. Full guidance is in the updated SARS guide: IT-AE-41-G03 – Guide to Complete Submit and Cancel a Recognition of Transfer.
Non-residents receiving retirement annuity pay-outs
A Double Tax Agreement (DTA) is a treaty between South Africa and another country that prevents the same income from being taxed twice. When a non-resident member of a retirement annuity fund receives a lump sum payout, a DTA may reduce or eliminate the South African tax that would normally apply, provided the relevant treaty allocates the taxing rights to the member's country of residence. In those cases, the fund administrator needs to flag this to SARS when applying for the Form C directive.
The old process was clunky. The fund administrator had to email SARS manually to request a DTA-related directive, outside of eFiling entirely. There was no formal tracking, no paper trail, and turnaround times were unpredictable.
From 17 April 2026, the process moved onto eFiling. Fund administrators can now indicate directly on the Form C application that a DTA applies. SARS then creates a manual review case to verify it. It is faster, traceable, and does not rely on anyone's inbox.
The deadline practitioners need to flag: from 17 April 2027, SARS will stop accepting manual email submissions for DTA-related directives entirely. Funds that have not moved to the eFiling process by then will find their applications simply rejected.
If you have clients with non-resident members receiving retirement annuity payouts, ask their fund administrator now whether they are still using the old email route. A year sounds like plenty of time. It rarely is.
Backdated Salaries and Pensions: More Detail Required
Where a directive is submitted with the reason "backdated or antedated salaries and/or pensions," the employer must now provide a breakdown of the payment into three categories: income, benefits, and deductions.
A single total figure is no longer sufficient. If you are preparing or reviewing a directive with this reason code, make sure the breakdown is ready before you start the application. Submitting without it will cause a delay.
Non-Resident Directives: The RST01 Validity Display Is Now Fixed
The RST01 is the directive for non-resident pension and annuity relief. It produces an IRP3er directive, which is valid for three years. The problem was that the issued IRP3er was not actually displaying the correct 3-year validity dates, creating confusion for both funds and taxpayers about when the directive expired.
This has been fixed from 17 April 2026. If you have non-resident clients for whom an RST01 was submitted recently, check the IRP3er to confirm the validity dates now show correctly.
For the full guidance on non-resident directives, see: IT-AE-33-G01 – Tax Directive Cease to Be Resident and Expiry of Visas.
What This Means for Your Practice
These changes are not administrative noise. The threshold increases in particular create a genuine conversation to have with retirement clients right now. Clients with retirement savings between R247,500 and R360,000 who previously exceeded the de minimis threshold may now qualify to commute their entire retirement benefit as a lump sum under the new R360,000 limit.
That conversation is billable. It is also the kind of proactive advice that keeps clients loyal and referring.
For the full picture of how the directive system has changed on eFiling, including the new setup process for user rights and tax type activation, watch for Part 2 of this series.
Further Reading
SARS Updates Tax Directives System — The regulatory notice covering the April 2026 changes in full
PAYE and VAT Registration Issues, What You Need to Know and Do — Practical steps for the registration problems SARS is seeing most often
2026 Tax Filing Season Changes — Key filing season updates every practitioner needs before submissions open
Budget 2026: What CIBA Asked For and What We Achieved — How the retirement threshold increases fit into the broader Budget 2026 picture
