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When is a trust not a trust?
AUTHOR: STEVEN JONES
When can the provisions of a trust deed be set aside? When you don’t stick to the rules
FAR TOO many people pay their accountant or attorney a visit, draw up a boilerplate trust deed, sign on the dotted line, and think that this piece of paper will take away all their tax and estate duty problems. No, it won’t. In fact, setting up a trust for the wrong reasons, or not understanding the legal implications of what a trust entails, could end up costing you a great deal of money for very little benefit. It could even cause you to lose money.
In a 2004 court case heard by the Supreme Court of Appeal, namely Land and Agricultural Bank of South Africa v Parker SA 186 / 2003, Cameron JA outlined some important legal principles concerning the status of trusts and those who are involved with trusts.
A trust is bound by its constitution
Except in cases where statute provides otherwise, a trust is not a legal person. It is an accumulation of assets and liabilities which constitutes the trust estate, which is a separate entity.
However, the accumulation of rights and obligations comprising the trust estate does not have legal personality. These rights and obligations vest in, and must be administered by, the trustees. It is only through the trustees, specified as in the trust instrument, that the trust can act.
Who the trustees are, their number, how they are appointed, and under what circumstances they have power to bind the trust estate are matters defined in the trust deed, which is the trust’s constitutive charter.
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Five home ownership costs you shouldn’t overlook
AUTHOR: GAVIN LOMBERG
It’s not all about interest rates
WITH INTEREST rates at a multi-year low, now is an opportune time for first-time homebuyers to step into the property market.
However, when it comes time to budget, potential homebuyers are urged to account for several important—but often overlooked—costs.
While home loan pre-approval gives homebuyers a clear idea of what they can realistically afford, many still overlook the additional costs of home-ownership that can quickly add up. In addition to widely known expenses such as bond registration and transfer costs, this article highlights five expenses that one should be aware of (and prepare for) on the home-buying journey.
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Is a maintenance payment a ‘donation’?
AUTHOR: STEVEN JONES
Helping someone out may be exempt from donations tax—but as always, the devil is in the detail…
DONATIONS TAX is one of those strange taxes where people often question its existence. After all, why would SARS be so mean as to want to tax someone’s generosity? The main reason is estate duty—or, more specifically, the potential avoidance thereof.
In fact, if donations tax did not exist, this would open a massive estate duty loophole. Since estate duty is levied at 20% of the taxable value of one’s estate exceeding R3.5 million (and at 25% of the portion exceeding R30 million), the easiest way to avoid estate duty in such a scenario would be to simply give away one’s assets prior to one’s death.
It is therefore no coincidence that the rates of donations tax are aligned with those of estate duty. According to the SARS website, donations tax is levied as follows:
From 1 March 2018, donations tax is levied at a rate of 20% on the aggregated value of property donated not exceeding R30 million, and at a rate of 25% on the value exceeding R30 million (Section 64(1) of the Income Tax Act).
Take note of the following –
In determining the R30 million threshold, the aggregate value of property donated commences from 1 March 2018 to date of current donation. Any donations made prior to 1 March 2018 must not be taken into account;
The aggregate value of property to determine the R30 million threshold is calculated after deducting any exemptions (Section 56); and
Where the donor has exceeded the R30 million threshold, all subsequent donations will be taxed at the rate of 25%.
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What to do when tax is not cut and dried
AUTHOR: STEVEN JONES
Do you have a complex transaction, and don’t know which way SARS will go? Ask them upfront!
MANY ENTITIES enter into complex transactions where the tax issues are not cut and dried, but the risk of SARS ruling against them is too great.
The good news is that since October 2006, there has been a mechanism for you to apply to SARS for a ruling before the transaction is entered into. These rulings are known as Advanced Tax Rulings (ATRs), and allow you to have certainty from a tax point of view before you go ahead with the particular transaction.
Previously, reliance on a ruling issued by a SARS branch office was problematic, since such rulings could be withdrawn at any time and would not hold much weight in legal proceedings. Under the ATR system, you can apply for a ruling that is binding both on the taxpayer and on SARS.
ATR applications must be submitted electronically via the SARS E-filing website (www.sarsefiling.co.za). An initial application fee of R2 500 for SMMEs or R14 000 for other taxpayers is payable on submission.
There is also a cost recovery fee which depends upon the complexity of the proposed transaction, as well as the issues raised in the application.
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Top 10 long-term stock picks for 2025
LAST YEAR was a strong year in global equity markets, with the perennially underperforming JSE also delivering a decent showing. The S&P 500 had a bumper year after a very strong 2023 as the AI revolution continued to give impetus to the technology sector, and embedded the ‘Magnificent Seven’ as the clear winners in the AI race.
The market has readjusted its interest rate expectations for the US Federal Reserve and by extension, interest rates globally. It is now expected that we will only see a further two cuts of 0.25% each in the US. The shallower than initially anticipated cutting cycle will likely be negative for risk assets.
In 2024, our stock picks delivered 29.5% on a total return basis in rands (measured from the day of publication, being 22 January 2025).
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Decisions made “for tax purposes”
AUTHOR: STEVEN JONES
When they make sense, and when they don’t
WHENEVER ONE makes any ...
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