Real Estate Investor Magazine South Africa December / Jan 2016 | Page 33

abolishment of the Conduit-Principle. The initial
report from the DTC toward the end of 2014 stated
that a change in the Conduit-Principle would result
in a huge impact, and therefore any intended changes
would have to be announced in the 2015 Budget Speech,
and would only be effective from the following tax year.
The 2015 Budget Speech included many references
and changes based on the DTC recommendations, but
interestingly, no reference or changes were made to the
Conduit Principle. However, the Conduit Principle
abuse continues, SARS continues to lose revenue, and
therefore change will be coming soon.

Understanding and applying the
Conduit-Principle is a specialist field,
and if applied correctly, can result in
an extremely tax-efficient structure.
Well-informed advisors consider the impact of such
changes, and therefore it should be noted that if the
Conduit Principle is completely abolished, the end
result would be as follows:
• In terms of using Trusts to reduce Estate Duty,
Capital Gains Tax, Executors Fees and other
www.reimag.co.za

related costs upon death – this would remain intact
(unaffected)
• In terms of using Trusts to provide for a virtually
seamless transition of wealth upon death to the
next generation by avoiding frozen Estate issues
and bureaucratic delays – this would remain intact
(unaffected)
• In terms of using Trusts to reduce exposure to asset
loss through litigation/divorce and so on – this
would remain intact (unaffected)
• In terms of using Trusts to reduce Income Tax using
the ‘Conduit Principle’ – this would not be possible
any longer, but there are several other methods that
can be used to reduce Income Tax. Essentially, for
Specialist Trust Advisors, eliminating the ConduitPrinciple will only frustrate the ability to reduce
taxation in a Trust, not eliminate it.
For those who setup Trusts with the sole purpose to
avoid tax using the Conduit Principle, the abolishment
thereof would result in an extremely frustrating tax
situation and possibly an obsolete structure. But, for
those who created Trusts to protect their hard-earned
wealth, the Trusts remain the ideal tool to achieve
effective Risk (Exposure) Management and Estate
Planning.

RESOURCES
www.finservegroup.co.za
DEC/JAN 2016 SA Real Estate Investor

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