Tax on a Pension Payout After Divorce in South Africa

When a divorce order awards you a cash share of your former spouse's retirement fund, you are the one taxed on it, not your ex-spouse, and the tax is worked out on the pre-retirement withdrawal lump sum table through a SARS tax directive. The member spouse whose fund it is pays no tax on the portion that goes to you. If, instead of taking cash, you have your share transferred to your own approved retirement fund, the transfer is tax-neutral and nothing is taxed until you later withdraw or retire.

This is the clean-break principle: the non-member spouse takes a defined share of the pension interest, and the tax follows that share into the hands of the person who receives it.

How the split is taxed

A divorce order can allocate part of the member's pension interest to the non-member spouse. That non-member spouse then chooses what to do with the amount, and the tax depends on the choice.

Take the cash, and the fund applies for a tax directive from SARS and taxes the amount in your hands on the withdrawal benefit table. This is the same table used when someone resigns and cashes out a fund before retirement, so it uses the lower tax-free band, not the more generous retirement table.

Transfer it to an approved fund (a retirement annuity, pension or provident fund in your name), and the transfer is not taxed. Your money keeps growing in a retirement vehicle and is only taxed when you eventually take it out.

The withdrawal table for the 2026 year of assessment (1 March 2025 to 28 February 2026) is:

Taxable lump sum	Tax
R0 – R27,500	0%
R27,501 – R726,000	18% of the amount above R27,500
R726,001 – R1,089,000	R125,730 + 27% of the amount above R726,000
R1,089,001 and above	R223,740 + 36% of the amount above R1,089,000

The R27,500 nil-rate band is a once-off cumulative amount across your lifetime, not something you get on every withdrawal. If you have taken withdrawal lump sums before, they use up the lower brackets first, so a later amount is taxed higher.

A worked example for the 2026 year of assessment

Take a non-member spouse who is awarded R300,000 in cash from the member's pension fund on divorce, and assume this is the first withdrawal lump sum this person has ever received.

The R300,000 sits in the second band of the withdrawal table, R27,501 to R726,000, taxed at 18% of the amount above R27,500:

• R300,000 − R27,500 = R272,500
• 18% × R272,500 = R49,050

So the tax is R49,050, deducted through the directive before the fund pays out. The non-member receives:

• R300,000 − R49,050 = R250,950

The member spouse is taxed on none of this. Had the non-member chosen to transfer the R300,000 to a retirement annuity in their own name instead, there would have been no tax at all at that point, and the R300,000 would keep growing until a future withdrawal or retirement.

A note on older divorce orders

The clean-break tax treatment above has applied since 2007. Payouts made under divorce orders granted before 13 September 2007 were dealt with differently and were, in effect, tax-free in the non-member's hands. That is history, not the current rule. Any divorce order today falls under the treatment described here, where the non-member spouse is taxed on a cash share via the withdrawal table.