A lump-sum directive sets the exact tax to deduct from a single, once-off payment that does not fit the normal monthly calculation. SARS identifies this type with the directive indicator L.
What it means
Lump sums - severance or retrenchment payouts, retirement fund withdrawals, certain leave payouts on exit - are taxed under special rules and tables, often with a tax-free portion. Rather than leave this to the payroll system, SARS calculates the tax itself and issues a directive stating the amount, which the employer applies to that payment only.
Where it fits in
The directive is payment-specific: it covers the one lump sum it was issued for and does not carry over to future payments. Payroll must apply the stated tax exactly, and processing a qualifying lump sum without the required directive is a common compliance failure.
Key rules
- Fixes the tax on a specific once-off lump-sum payment.
- Carries the SARS directive indicator L.
- Required for most severance payouts and retirement fund withdrawals above the tax-free portion.
- Applies to that single payment only, not to future ones.
