Senwes Scenario Desember - Februarie 2020 | Page 49

FINANSIES | FINANCES
Even though there is a disposal at
the time when the property is transferred
to B, it will not trigger capital gains tax
as it is disposed of and acquired at the
same price, the market value at the time
of transfer. When B ultimately sells the
property, the base cost will be R1 000 000
and not R1 500 000, so his capital gains
liability will be higher.
The trust sells an asset
If having sold the asset, the trust distri­
butes the gain to beneficiaries, the gain
will be ignored in the hands of the trust
and taxed in the hands of the beneficiary.
Should the trust retain the gain instead of
distributing it in the tax year the asset was
disposed of, the gain will be taxed in the
hands of the trust.
MULTIPLE TRUST STRUCTURES AND
INSURANCE POLICIES
An example of a multiple trust structure
would be where a share trust has as its
beneficiary a family trust and the share
trust distributes a capital gain to the
family trust. The family trust would then
distribute that same capital gain, in the
same financial year, to its natural person
beneficiaries. In the past, it was common
practice for such capital gain to be taxed
in the hands of the eventual individual
beneficiaries.
The Comprehensive Guide to Capital
Gains Tax, SARS makes it clear that this
arrangement is no longer accepted. The
argument is that when the share trust
distributed the gain to the family trust a
disposal occurred, the attribution rules
should apply to that transaction, and CGT
would be payable by the family trust.
When the asset is transferred to the indi-
vidual beneficiary by the family trust, there
will be no CGT on the disposal because
the base cost will be the same as the pro-
ceeds in the family trust.
SARS’ interpretation of the attribution
rules was undoubtedly a blow for the mul-
tiple trust structure which feeds into one
central trust (normally a family trust). The
mechanism to move gains from one trust
to another and ultimately to natural per-
sons, paying as little CGT as possible, no
longer exists. This means that there could
be financial shortfalls in the planning of
the individuals who will now receive less
capital than anticipated. They will need to
source additional capital elsewhere, and
life insurance may provide the ideal vehi-
cle for doing so.
Disclaimer: Legal or Financial Advice
Liberty Group Ltd is an Authorised Financial
services Provider in terms of the FAIS Act
(Licence no. 2409), and a wholly owned
subsidiary of Liberty Holdings Limited. The
information contained in this communication,
including attachments, is not to be construed
as advice in terms of the Financial Advisory
and Intermediary Services Act of 2002 ('FAIS')
as it is provided to assist financial advisers
in providing advice. The writer although an
appointed representative of Liberty Group
Limited, is not allowed to sell financial products.
Please consult your financial adviser should
you require advice of a financial nature and/
or intermediary services. In addition, this
communication, including any attachments, if
received outside Liberty is not to be considered
as legal or tax advice to any third party.
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