The 2011 Budget presented by Finance Minister Pravin Gordhan has been generally well received by most sectors, and as he himself said “(t)his Budget sets us on a path that will be neither easy, nor uncontested – hard work and difficult choices lie ahead.”
The “usual suspects” are present, increases in sin tax, (a possible tax on gambling winnings has been proposed), and fuel tax, but balanced against this is a measure of tax relief for individual taxpayers – particularly in the lower income brackets with a broadening of the tax bands – so reducing fiscal drag, and a marginal increase in the tax concessions to individuals when commuting their lump sum benefits from retirement funds.
Importantly, the tax rates for Trusts and Estate Duty have been left untouched.
SPECIAL TRUSTS
Special Trusts are those trusts which have been set up for the benefit of minors and others who are unable to care for themselves as a result of their age or particular mental or physical disability. These trusts will be taxed at the same rates as individuals. The more income that is generated by these trust, the greater their tax burden will be.
Trusts that are not Special Trusts will be taxed at a flat rate of 40{bb7c59228909ee3c635bb54164678f79c6c2320af74994b444cd69be7e87e9c7} - regardless of the income. Those trusts, for example, are the so-called “Business Trusts”.
Capital Gains Tax on the disposal of assets by trusts remains unchanged at 20{bb7c59228909ee3c635bb54164678f79c6c2320af74994b444cd69be7e87e9c7}.
ESTATE DUTY
In the Budget Review published simultaneously with the Budget Speech, Minister Gordhan indicated that Estate Duty was currently being reviewed, with several options being considered. The rate of Estate Duty is still 20{bb7c59228909ee3c635bb54164678f79c6c2320af74994b444cd69be7e87e9c7} on property of residents and South African property of non-residents. A basic deduction of R 3 500 000 is allowed on the determination of an estate's liability for estate duty. In addition, liabilities of the estate are deductible, as are bequests to public benefit organisations and any property that is bequeathed or accrues to surviving spouses.
DONATIONS TAX
Donations tax, too, has been left undisturbed. The tax is levied at the rate of 20{bb7c59228909ee3c635bb54164678f79c6c2320af74994b444cd69be7e87e9c7} on the value of property that is donated. Donations are often used in estate planning exercises, and donors can take advantage of a tax exempt amount of R 100 000 per annum. This amount is non-cumulative, and if not used in any year is lost forever.
Currently therefore, the 2011 Budget does not make any changes to the tax rates on Trusts, Estate Duty and Donations and we wait until Pravin Gordhan's next budget when these may well be reviewed.
