Page 51 - Nexia SAB&T Trust Guide 2024

TAX TREATMENT OF SPECIAL TRUSTS

Unlike conventional or “ordinary” trusts which are taxed at a flat rate of tax (45%
for the 2025 year of assessment), both Type A and Type B special trusts are
taxed on the same sliding scale applicable to natural persons, except that the
rebates medical tax credits and interest exemptions do not apply.

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 beneficiary uses the property mainly (more than
50%) for domestic (that is, residential) purposes.

On disposal of personal-use assets by Special Trusts, capital gains or losses
thereon may be disregarded for Special Trusts Type A, but not for Special Trusts
Type B. In addition, a Special Trust Type A may disregard capital gains or losses
on compensation for personal injury, illness, or defamation of the beneficiary of
that trust, but this is not the case for a Special Trust Type B.
Only a Type-A Special Trust is excluded from the application of section 7C – and
not a Type B Special Trust.

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