Real Estate Investor Magazine South Africa May 2013 | Page 39

RESIDENTIAL
Further in the Budget Review Document,
it states that if the trust distributes revenue
to a beneficiary then this will be a deduction,
effectively the tax position in a trust will be
neutral if a distribution is made in the same
year and the distribution is of revenue in nature.
Accordingly the beneficiary will be liable for the
tax at their effective rate.
The conduit principle is therefore alive and
well, so nothing has changed on the income /
revenue front BUT the position pertaining to
interest and capital gains is set to change and
this is where some great tax advantages may be
lost. The proposals state that the distribution
from a trust to a beneficiary will treated as
revenue in the hands of the beneficiary.
The current position is that a capital gain can
be attributed to a beneficiary, the beneficiary
enjoys the annual capital gain exemption
and only a portion of the gain is included as
income depending on the inclusion rate of the
beneficiary: 33.3% for individuals and 66.6%
for companies and trusts
How these changes are to be implemented
remains to be seen as capital gains are attributed

and not distributed from a tax perspective.
We wait with bated breath…
The above notwithstanding, trusts are still the
ONLY entity that can provide comprehensive
asset protection, estate duty savings, capital
gains ta x savings on death, avoidance of
hefty executor’s fees and other costs related to
winding up your estate, ensuring the continuity
of the legacy you are building and of course
protecting your minors and persons who need
to be protected from themselves!

As with any change or obstacle there is
opportunity for those who fully understand
trusts and the taxation of trusts.

“Trusts are still the ONLY
entity that can provide
comprehensive asset protection”
In closing we suggest that you maintain the
status quo and wait for Treasury to implement
the proposed changes if they transpire at all.
The changes will affect many aspects of the
Income Tax Act and we firmly believe that the
revenue that will be generated from this exercise
is miniscule relative to time and expense that
will be expended to implement the changes.
SARS must have better things to focus on!

ABOVE: Finance Minister Gordhan

RESOURCES
Delgado Velosa Kenworthy & Associates Inc