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Trusts (Definitions (Trust
-Any trust fund
-consisting of cash/other…
Trusts
Definitions
Trust
-Any trust fund
-consisting of cash/other assets
-which are administered & controlled by
-a person acting in a fiduciary capacity appointed by deed
-
-
Resident
Trust= SA Resident when:
-est. in Republic, or
-place of effective. mgmt. in Republic
Person
-Includes any trust, THEREFORE trust is subject to tax in its own right
S25B
25B(1)
-Any amount rec by/accrued to/ in favor of any person
-in his/her capacity as a trustee
-shall, subject to s7,
-to the extent that it has been derived for immediate future benefit of beneficiary who has a vested right ito such amount during yr,
-be deemed to be an amount that has accrued to beneficiary
-otherwise it is accrued to the trust
25B(2)
-Where beneficiary has acquired a vested right to any amount
-in consequence of a trustee
-such amount is deemed to be derived in benefit of beneficiary
25B(3)
-Any deduction/allowance which related to amount accrued to beneficiary/trust
-Is deemed to be a deduction which is permitted in hands of person deemed to have derived amount
25B(4)
-Any deduction/allowance in 25B(3)
-Allocated to a beneficiary
-Is ltd. to income accruing to beneficiary from trust
-i.e. can't create loss
25B(5)
-Excess of expenditure over income from 25B(4)
-Shall be deducted by trust in that yr
-BUT ltd. to TI of trust before deduction
25B(6)
-Excess of 25B(5)
-granted as deduction for BENEFICIARY
-BUT only in next YOA
-Subject to 25B(4)
Types of Trusts
Testamentary Trust
-Created ito will of dead person
-Income to be taxed in hands of either trust/ beneficiaries
-TRUST taxed on income it retains
-BENEFICIARIES taxed on income distributed
Inter-Vivos Trust
-Formed by living person
-Therefore founder could be liable for tax on income received
-Taxed subject to s25B & s7
Special Trusts
Formed solely/mainly for;
-Person with disability (ceases when disabled beneficiary is dead)
-Will of dead person, SOLELY benefit of living relatives on date of death. Trust must have at least 1 person <18yrs
Types of Rights
-
Contingent
-Conditional accrual to beneficiary
-At discretion of trustees
-vested ONLY when trustee decided to give it to beneficiary
Features of a Trust
- Assets in trust must be clearly identifiable & founder must dispose of them to trustees
- Nomination of trustee(s) to administer trust for the benefit of beneficiaries
- ID of beneficiaries
- Placing asset under control of trustees
- Clearly indicate directions for administration of trust in deed
- Founder must have intention to create a trust
-
Tax Rates
Ordinary Trust
-Flat rate of 45%
-No interest exemption or Rebates
Special Trust
-Sliding Scale (CGT 40%)
-No Rebates
Beneficiary
-Sliding Scale (CGT 40%)
