Page 28 - Nexia SAB&T Estate Planning Guide 2024

planner will probably have to pay donations tax. In order to gradually
reduce the loan account, the estate planner may then donate up to
R100,000 each year to the trust without attracting any donations tax
liability. The balance of the loan account will be included in his estate
when he dies.
u Due to the anti-avoidance rules relating to interest-free loans, a sale
by way of an interest-free loan should only be considered when the
expected future growth of the asset sold is to exceed the SARS Official
Interest Rate.
n Bequests to a trust for the benefit of a surviving spouse may or may not
qualify for the Section 4(q) deduction, depending on how the trust deed has
been drawn up.
D Capital gains tax and Trusts
n With the introduction of capital gains tax, the effectiveness of the use of
trusts in estate planning has been slightly negated, but with careful planning
the impact of capital gains tax can be reduced and even completely avoided.
n Capital gains tax is payable by any trust in South Africa on any gains made
due to a disposal of assets after 1 October 2001.
n For ordinary trusts, 80% of the net gain is added to the taxable income of the
trust. As trusts are taxed at a flat rate of 45% on taxable income, the effective
rate of tax on capital gains will be 36% (for the 2025 year of assessment).
There is no primary residence rebate for these trusts.
n For Capital Gains Tax purposes, both the Type-A trust and Type-B trusts are
treated as an individual, with a capital gains tax inclusion rate of 40% (2025
year of assessment). The distinction between a Type-A trust and a Type-B
trust is important however, in that a Type-A trust qualifies for certain further
relief from Capital Gains Tax (CGT) while a Type-B trust does not qualify
for such relief. Type A trusts will be allowed the CGT exemption for primary
residence (where a primary residence is disposed of, the capital gains
relating thereto of up to R2 million is exempt from CGT), should all other
requirements also be met in order to qualify. The Type-A trust also qualifies
for the CGT annual exclusion (R40 000 for the 2025 year of assessment).
The property legally and beneficially owned by a Type-A trust will be a
“primary residence” of that trust, provided the beneficiary or a spouse of the

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