A South African family trust has recently raised important tax issues involving income and capital distributions, trustee withdrawals, and a trustee, beneficiary exit. Here’s what trustees and beneficiaries need to know:
Interest Income
Trusts earning investment interest must declare it in their annual tax returns, unless formally vested to beneficiaries before year-end, in which case the beneficiaries must declare it personally.
Distributions & Withdrawals
- Income distributions are taxable in the hands of the recipient.
- Capital withdrawals may trigger Capital Gains Tax (CGT) if they involve asset disposals.
Trustee–Beneficiary Exit
If a trustee, beneficiary sells their interest, CGT applies to any gains made. Discretionary trust exits may involve legal complexity, including repudiation concerns.
Outstanding Returns & SARS Penalties
With the founder deceased and multiple tax years unfiled, the trust must act urgently to avoid penalties, interest, and SARS enforcement. Compliance with both the Income Tax Act (ITA) and Tax Administration Act (TAA) is essential.
Let CTF Services Guide You
Whether managing trust distributions, addressing tax compliance, or navigating a trustee buy-out, CTF Services offers expert guidance. Reach out today to bring your trust affairs up to date and protect your financial interests
