If you took a savings-pot withdrawal and are now facing two-pot retirement system tax owed on your 2026 SARS assessment, the reason is mechanical: the tax your fund withheld came from a SARS tax directive calculated on an estimated marginal rate, not on your actual year-end income. The directive was a prepayment. Your ITR12 recalculates the real figure and bills the difference.
SARS issued auto-assessment notices between 1 July 2026 and 12 July 2026, and taxpayers who were not auto-assessed or who disagree must file from 13 July to 23 October 2026, per the Changes for Filing Season 2026 page dated 29 June 2026. Savings withdrawals taken during the 2026 year of assessment, which ran from 1 March 2025 to 28 February 2026, are landing in those assessments now, and 1 September 2026 marks two years since the system commenced on 1 September 2024.
I’m Chris Herbst, Managing Director at CH Consulting. I am a Chartered Business Accountant in Practice, CBAP (CIBA), with the Chartered Institute for Business Accountants, and a General Tax Practitioner, GTP (SAIT), with the South African Institute of Taxation. Our practice has spent this filing season reconstructing directive records, fund IRP5/IT3(a) certificates and statements of account for individual taxpayers who could not work out why their assessment showed a balance owing after a withdrawal they thought was already taxed.
Why do I owe two-pot retirement system tax on my 2026 SARS assessment when the fund already deducted tax?
You owe money because the tax your fund withheld was an employees’ tax deduction based on a directive estimate, and the final liability is only determined when your ITR12 pulls all your income together at your true marginal rate. SARS states plainly that any under or over deduction of tax from a two-pot withdrawal will be settled in favour of the taxpayer or SARS on assessment during the annual Filing Season, in its media release on the tax implications of withdrawing from the two-pot retirement system.
The source code confirms the design. The withdrawal is reported under source code 3926, described in the SARS employer reconciliation guidance as “Savings withdrawal benefit: Withdrawal from a Retirement Fund from the Savings Component/Pot”. In the SARS PAYE BRS, the “PAYE” flag on a code description means the income is subject to the deduction of employees’ tax and will also be taxed when the income tax assessment for the employee is processed, as set out in the PAGSA note on the code 3926 validation rules.
Was the withdrawal taxed twice?
No. The amount withheld under the directive is credited against your final liability on the assessment. What you are paying now is the shortfall between the estimate and the real number, not a second tax on the same Rand.
Why was the directive rate too low in the first place?
The Savings Withdrawal Benefit is taxed using the annual payment or bonus tax calculation based on your marginal rate, and no retirement rates, allowable deductions, exemptions or tax-free amounts are used in that calculation, according to the SARS page on tax directive enhancements and the tax implications of the two-pot retirement system. The whole calculation rests on one input: the annual remuneration figure the fund captured.
What exactly is the tax directive, and why can’t I dispute it?
A tax directive is SARS’s binding instruction to your fund on how much employees’ tax to withhold from the lump sum before paying you, and paragraph 9(3)(a) of the Fourth Schedule to the Income Tax Act 58 of 1962 provides that the Commissioner’s determination of the amount to be deducted or withheld “shall be final”, which practitioners read as excluding any right of objection and appeal against the directive itself. The Tax Faculty FAQ on this point notes that because the directive is not an assessment, the error is normally fixed on assessment instead.
You cannot apply for the directive yourself. Employers, including administrators of pension, pension preservation, provident, provident preservation and retirement annuity funds defined in section 1(1), must apply under paragraph 9(3) of the Fourth Schedule, per the SARS guide to completing the lump sum tax directive application forms.
Which form did my fund use?
The application is the IRP3(a), titled “Application for a Tax Directive: Gratuities and Two-Pot Savings Withdrawals Benefit”, with a directive reason of “Savings Withdrawal Benefit”. The SARS completion guide for the IRP3(a) and IRP3(s) confirms the policy number is mandatory for these applications and the date of accrual may not be before 1 September 2024.
Can a directive be cancelled instead?
SARS operates a directive cancellation process, and its own guidance records the two-pot calculator as a way to mitigate requests for cancellation where a taxpayer is unhappy with the amount withheld. Administrators generally take the view that cancellation is not available once the money has been paid out, and SARS has not published a rule on cancellation after payment. If cash flow matters to you, ask your administrator in writing; if the answer is no, the correction happens on the ITR12.
Why did my fund put a nil or wrong annual remuneration on the IRP3(a)?
Because the SARS form accepts it. The completion guide IT-AE-41-G01, effective 17 April 2026, defines annual remuneration as all income from employment, an insurer or retirement fund, covering salary, wages, bonus, leave pay, commission, pension, overtime, allowances and annuities, and warns that if the figure is not completed correctly the tax calculation will be incorrect and “might cause financial hardship for the employee” (IT-AE-41-G01). Yet where the directive reason is “Savings Withdrawal Benefit” and no annual remuneration is provided to the fund, a nil amount will be accepted, though the field may not be left blank.
SARS has acknowledged the consequence. On its tax directives archive page, SARS recorded that annual remuneration has been under-declared in some directive applications where taxpayers are still employed, resulting in a nil or lower tax directive amount and “the incurrence of a debt on assessment”, and said its systems would be enhanced to calculate the taxable amount based on information available to SARS rather than the declared figure.
Who is at fault, and does it matter?
The fund and the taxpayer take different positions. The fund’s view is that it is a conduit: it captures what the member declares or what the last IRP5 showed, and paragraph 9(3)(a) makes the Commissioner’s determination final, so the fund has discharged its duty by applying the directive. The taxpayer’s view is that the fund is the applicant on a form it signs, and the guide places responsibility for correct completion on the applicant. SARS’s operational answer is to override the declared figure using third-party data, and SARS has not published a legal instrument for that override.
Practically, none of the three positions gives you a remedy against the directive. What they change is whether you have a complaint against the administrator alongside the corrected assessment, and whether a member who withdrew early in the 2026 year is worse off than one who withdrew later.
What is the IT88L that reduced my payout, and could SARS do that?
An IT88L is a stop order attached to your tax directive where you have outstanding taxes owing to SARS, and the fund pays those amounts over to SARS before paying you the balance. SARS confirms on its two-pot directive enhancements page that the types of outstanding taxes can include Assessed Tax, Provisional Tax and Administrative Penalties.
Practitioner commentary grounds the IT88L in section 179(1) of the Tax Administration Act 28 of 2011, under which a senior SARS official may direct a person holding money for a taxpayer to pay it over to settle a tax debt. On that reading the fund has no discretion, the IT88L cannot be cancelled, and the deduction is only avoided where SARS Debt Collection issues a letter to the administrator confirming an arrangement, a settlement agreement or that the debt has been settled, per Simeka Consult’s technical note.
Should SARS have sent me a final demand first?
Section 179(5) of the TAA requires SARS to deliver a final demand to the taxpayer at least 10 business days before issuing a third-party notice, and that demand must set out the recovery steps SARS may take and the debt relief mechanisms available, as summarised by Cliffe Dekker Hofmeyr. One position is that the IT88L is a section 179 appointment, so a member who never received a compliant final demand may have grounds to challenge it. The other position is that the deduction is administered as a stop order ancillary to the paragraph 9(3) directive, so the section 179 safeguards are not engaged in the same way. The answer turns on your own demand history, so we review that history before advising on any challenge.
Does a payment arrangement stop the deduction?
SARS states on its two-pot retirement system page that where a member has a valid debt arrangement or suspension agreement, no debt deductions will be made from the two-pot withdrawal, and without one SARS will instruct the fund to withhold part or all of the outstanding debt. In practice the exemption depends on Debt Collection getting the letter to the administrator in time. A garnishee running off your salary is not the same thing as an arrangement.
How do I read my 2026 assessment and work out where the number came from?
Start by separating three figures: the gross savings withdrawal benefit shown against source code 3926, the employees’ tax the fund withheld under the directive, and the IT88L amount that went to old debt. Only the first two appear on your ITR12; the IT88L reconciles on your statement of account.
Auto-assessments are compiled from information supplied by employers, banks, medical schemes, retirement funds and insurers, as BusinessTech reported when SARS announced the 2026 season dates. That is why a retirement fund shows up on your assessment looking like a second employer you have never worked for.
Why did my payout not match the calculator?
The eFiling dashboard two-pot calculator gives an estimate based only on the annual remuneration and savings withdrawal amount you captured, per the SARS guide to tax directive functionality on eFiling. It is a simulation. It does not know about an IT88L, and it does not know about your administrator’s own withdrawal or administration fee, which is not a SARS deduction and appears in none of the SARS calculators.
What if the withdrawal is missing from my auto-assessment entirely?
Where the fund filed the certificate late, or filed it against an incorrect tax reference number or ID, the withdrawal can be absent even though the directive exists. Accepting that auto-assessment does not make the problem go away; it surfaces later as an additional assessment, with interest running from the original due date. We wrote about this pattern in The Hidden Risks of Relying Solely on SARS Auto-Assessments.
What are the 2026 deadlines I am working against?
Non-provisional individual taxpayers must file by Friday, 23 October 2026, and provisional individual taxpayers by Friday, 22 January 2027, per Notice No. 7422 published in Government Gazette No. 54598 of 30 April 2026 and summarised by Moonstone. The 2026 year of assessment covers 1 March 2025 to 28 February 2026.
- 1 to 12 July 2026: What happens: Auto-assessment notices issued; Status for a two-pot withdrawal: Fund data pre-populated
- 13 July to 23 October 2026: What happens: Filing window, non-provisional; Status for a two-pot withdrawal: Deadline gazetted
- 40 business days from auto-assessment: What happens: Section 95(6) reduced assessment request; Status for a two-pot withdrawal: Interaction with 23 October
- After 27 August 2026: What happens: Late-dated auto-assessments; Status for a two-pot withdrawal: Extension carve-out applies
- 22 January 2027: What happens: Provisional individual deadline; Status for a two-pot withdrawal: Deadline gazetted
Can I really wait until October to fix an auto-assessment?
Be careful here. Section 95 of the TAA is the basis for auto-assessments, and sections 95(5) and (6) mean an objection or appeal is only competent once you have requested a reduced assessment within 40 business days of the date of the estimated assessment and SARS has declined to make one, as the Tax Faculty guide to section 95 sets out. SARS has said auto-assessed taxpayers for 2026 have until 23 October to request a reduced or additional assessment, but not where the auto-assessment is dated after 27 August 2026, attributed to Commissioner Johnstone Makhubu in BusinessTech coverage dated 19 June 2026.
One position is that the extension displaces the 40-day period, so a request lodged on 22 October is in time and preserves your objection rights. The other is that the extension is an administrative concession about correcting, and letting 40 business days lapse risks SARS treating a later objection as premature or out of time. We have not been able to check the precise gazette wording of the extension, so we treat it as unresolved. The safer course is to file the corrected ITR12 well inside 40 business days of the auto-assessment date. Our walkthrough on how to dispute a SARS auto-assessment in 2026 covers the sequence, and the 2026 filing season deadlines post sets out the rest of the calendar.
What do I actually do now, step by step?
Work in order, because each step depends on a document from the one before.
- Pull your statement of account. SMS 47277 for a balance or statement, which works without data or airtime, or request it on eFiling or the MobiApp; dial *134*7277# and choose option 3 to check outstanding returns, per the SARS two-pot page. This is the only place the IT88L side reconciles.
- Get the IRP5/IT3(a) from the fund administrator. Ask for the certificate showing source code 3926, the gross savings withdrawal benefit and the employees’ tax withheld. Retirement funds are not your employer, so these are often never posted or emailed.
- Get the directive itself. Ask the administrator for the directive number and directive amount, and check them against the Tax Directives menu on eFiling, which now sits at top level and includes prior-year history.
- Open the ITR12 on eFiling. Compare the pre-populated fund figures line by line with the certificate. Where the directive was priced on a nil or stale remuneration figure, expect a shortfall rather than a refund.
- Add everything the directive ignored. Retirement contributions under section 11F, medical credits and your rebates all come into play on assessment even though the directive used none of them. Our note on retirement fund deductions and the 2026 document checklist are useful here.
- File and read the ITA34. For 2026, SARS can deliver the Notice of Assessment via WhatsApp to auto-assessed taxpayers who do not use email or eFiling, and supporting documents can be uploaded the same way.
- Deal with the balance owing. If you cannot pay in full, engage SARS Debt Management about a payment arrangement, and consider a suspension of payment where you are disputing. The eFiling dispute channel handles RFR, Notice of Objection, Notice of Appeal, Request for Reasons, Request for Late Submission and Suspension of Payment, per the SARS guide to submitting a dispute via eFiling.
Where does a Request for Remission fit?
A Request for Remission relates to administrative non-compliance penalties, not to the tax on the withdrawal itself. SARS requires that an RFR be submitted and considered before the objection process can be used, and if it is disallowed or partially allowed you may then object and appeal, per the SARS remission page. The RFR is captured on form RFR1 from the Income Tax Work Page on eFiling.
What are the most common mistakes with two-pot retirement system tax owed on a 2026 SARS assessment?
The errors we see repeat with unusual consistency, and most of them are recoverable if caught before 23 October 2026.
Assuming the directive percentage was your real tax rate
The directive uses no deductions, exemptions or tax-free amounts. Comparing the withheld percentage to what you expected to pay tells you almost nothing about the final outcome.
Two withdrawals from two funds in one year
Each directive is priced in isolation on its own annual remuneration input. Nothing in the published material describes aggregation across directives at directive stage, so the combined amount only pushes you into a higher bracket on assessment. SARS has not published whether its recalculation using its own data captures a prior directive in the same year, so budget for the combined amount on assessment.
A bonus in the same tax year
The bonus is also taxed on the annual payment basis. Two annual payments in one year compound the under-deduction, and neither directive knows about the other.
Treating the administrator’s fee as tax
The withdrawal or administration fee your fund charges is not a SARS deduction and does not appear on your assessment. Reconcile it separately or you will chase a phantom difference.
Accepting an auto-assessment because it looked right
Doing nothing accepts it, along with any missing or misstated fund certificate. Our post on what to do when the auto-assessment SMS arrives covers the decision points.
Missing the return altogether while waiting for a fund certificate
An administrative penalty is levied under section 210 of the TAA, with a fixed-amount penalty for failing to submit a return ranging from R250 to R16 000 a month based on taxable income, recurring monthly to a maximum of 35 months, per the SARS admin penalty page. Waiting on a fund is not a defence. If you have already slipped, missing the tax deadline sets out what to do next.
What does SARS already hold, and how does a mismatch show up?
SARS holds more about your withdrawal than you do, because SARS issued the directive itself. Before any certificate is filed, SARS has your tax reference number, the fund, the policy number, the date of accrual, the gross savings withdrawal benefit and the tax it directed the fund to withhold.
The fund then files an IRP5/IT3(a) with source code 3926 through the reconciliation process. The BRS legislative references for that code run to the fund definitions in section 1(1), paragraph 2(1)(d) and paragraph 6B of the Second Schedule, the definition of “savings withdrawal benefit” read with paragraph (eD) of the gross income definition, and paragraph 9(3)(a) of the Fourth Schedule, applicable from the 2025 year of assessment (PAGSA). Code 3926 also appears in the SARS Guide for Codes Applicable to Employees Tax Certificates for 2026, effective 19 September 2025, as “Savings withdrawal benefit (PAYE)”.
The debt side is already in SARS’s systems too, which is how an IT88L attaches to the directive at source. A mismatch arises where the fund’s certificate carries the wrong tax number, or arrives after the auto-assessment run. If SARS then raises an additional assessment, expect a verification request; our guide on SARS verification of supporting documents explains what to send. Where a refund is caught up in the same process, delayed refunds in 2026 covers the follow-up.
Is there an Interpretation Note on the savings withdrawal benefit?
SARS has not issued an Interpretation Note or Binding General Ruling dealing specifically with the savings withdrawal benefit. The operating rules sit in the Act, the Fourth and Second Schedules, the IRP3(a) completion guide and the PAYE BRS, not in an Interpretation Note you can point to in a dispute.
Does a two-pot withdrawal make me a provisional taxpayer, and will interest apply?
A savings withdrawal benefit is subject to employees’ tax under paragraph 9(3)(a) of the Fourth Schedule. SARS has not published guidance on whether receiving one affects provisional taxpayer status, or whether section 89quat interest can attach to the resulting shortfall, so check both against your own income and assessment.
What is published is that for the 2026 Filing Season, certain provisional taxpayers may be issued with an auto-assessment. SARS interest Table 2, covering credit amounts under section 89quat(4), shows 6.50% from 01.11.2025 to 28.02.2026 and 6.25% from 01.03.2026 until the PFMA rate changes (Table 2). A secondary summary reports the rate on outstanding taxes in Table 1 moving from 10.50% to 10.25% from 1 March 2026, and we would check that against the SARS Table 1 publication before relying on it. If you already file an IRP6, our note on the first provisional calculation for 2026 may help, and who should register for provisional tax covers the threshold question.
What about the R550 000 tax-free lump sum?
Savings withdrawal benefits are not aggregated with the retirement lump sum tax tables and do not influence a member’s R550 000-at-0% lump sum benefit; the two are subject to different regimes and different tables, according to administrator technical guidance on the practical side of paying tax on a savings withdrawal benefit. That is why marginal rates apply and the retirement tables do not.
I live overseas. Is my South African savings pot withdrawal taxed here?
From 11 September 2025, a fund can submit a savings withdrawal benefit directive application for members who are not South African tax residents but hold a valid SA tax number, where a double tax agreement must be taken into account, per the SARS IRP3(a) completion guide page. Where a DTA directive is issued, the fund submits a manual IRP3(a) and SARS issues a manual IRP3(e) showing either nil tax or the partial amount. Residency status drives the outcome, and our post on tax residency in South Africa is the starting point.
Do You Need Help With Two-Pot Retirement System Tax on Your 2026 Assessment?
If your 2026 assessment shows a balance owing after a savings-pot withdrawal, or your payout was smaller than the directive suggested and you cannot work out where the money went, we can reconstruct the directive, the source code 3926 certificate and the statement of account, and set out the options open to you before 23 October 2026. Book a call to talk through your own circumstances, or email info@chconsulting.co.za with your questions and we will point you to the right next step.
