The 2024 trust tax season is well underway, with the South African Revenue Service (SARS) setting the filing period for trusts between 16 September 2024 and 20 January 2025. This year has brought some significant changes that trustees and business owners need to be aware of. These changes not only require thorough documentation but also increased transparency and detail on the activities and financial position of trusts. It is essential for trustees to ensure compliance, as SARS has intensified scrutiny on trust operations and beneficial ownership.
Key Changes for Trust Tax Season 2024
1. Updated Filing Requirements and Documentation:
Trustees must complete the Income Tax Return for Trusts (ITR12T) and submit a comprehensive set of supporting documents, which now include the trust deed, annual financial statements, and trustee meeting resolutions. This requirement is crucial for all trusts, including those considered dormant. The supporting schedules must also include specific information regarding the trust's assets, liabilities, and distributions made to beneficiaries.
2. Beneficial Ownership Information:
SARS now mandates that details about beneficial ownership be submitted during the tax return process. Trustees need to provide information on all individuals who benefit from the trust, which includes an illustrative organogram depicting the effective control of the trust. This additional layer of information aligns with international obligations, such as those under the Financial Action Task Force (FATF), to ensure transparency and prevent tax evasion and money laundering activities.
3. Third-Party Data and IT3(t) Reporting:
The reporting requirement for third-party data, including IT3(t) certificates, is a significant addition for 2024. Trustees must now submit detailed information about distributions and financial activities involving beneficiaries. Unlike some other tax forms, IT3(t) data will not be pre-populated this year, meaning trustees are responsible for providing complete and accurate information for SARS' records. This is crucial, as any discrepancies could lead to penalties, adding further importance to ensuring the correctness of the data provided.
Compliance and Penalties
SARS is taking a firm stance on non-compliance this year. Trustees are liable for significant penalties if they fail to meet the requirements set out by SARS. This includes fines of up to R10 million, imprisonment for up to five years, or both, for failing to comply with the income tax requirements. Trustees are also responsible for ensuring that beneficiaries accurately report any income vested in them, as SARS cross-references this information to verify consistency and correctness in reporting.
Tips for Trustees and Business Owners
Stay Informed About the Requirements: Understanding the full scope of the new requirements, including those regarding beneficial ownership and IT3(t) reporting, is critical. Regularly checking SARS' communications and consulting with tax professionals can help trustees stay updated.
Prepare Documentation Early: Trustees should gather all necessary documents, including financial statements, trust deeds, and minutes of trustee meetings, well ahead of the deadline to avoid last-minute issues. Ensuring all trust-related information is correct on SARS eFiling will also minimise the risk of errors during submission.
Professional Assistance is Crucial: The complexity of trust taxation, particularly with the expanded information requirements, makes professional assistance indispensable. Experienced accountants and tax consultants can assist trustees in meeting all compliance obligations accurately and efficiently.
Looking Ahead
Business owners who utilise trusts within their structures should also ensure that their entities are aligned with these updated requirements, as trusts play a significant role in wealth management, estate planning, and asset protection. Proper adherence to SARS' regulations will not only help avoid penalties but will also support a more efficient and compliant tax environment in South Africa.
Please note that the above is for information purposes only and does not constitute tax/financial advice. As everyone’s personal circumstances vary, we recommend they seek advice on the matter. While every effort is made to ensure accuracy, Nexia SAB&T does not accept responsibility for any inaccuracies or errors contained herein.
Article prepared by: Stefan Diederiks CA(SA)
Entrepreneurial Business Services Director, Registered Tax Practitioner
For any queries or further information, please contact:
• Mansoor Salee
External Audit Director
M: (+27) 82 454 4786| E: mansoor@nexia-sabt.co.za
• Yousuf Hassen
Entrepreneurial Business Services Director
M: (+27) 82 333 3376 | E: yhassen@nexia-sabt.co.za
Source: The South African Revenue Services