The operation of trusts in South Africa and the roles and responsibilities of trustees underwent a wide variety of changes from various sources this year. The changes place additional responsibilities and obligations on trustees and their roles in the administration of a trust. The changes can also pose significant risks for trustees if they fail to comply.
The two main changes / discussion points around trusts for 2023 so far are the following:
Maintaining of trust records
The legal obligations in relation to trusts’ reporting and record keeping were discussed in general in our April newsletter (please follow the link to the article here). It was at that time shortly before the Master’s implementation date of 1 April 2023 and with limited information available as to the operation of the system through which the reporting had to be done by responsible persons.
On 1 April 2023, the Master launched an online portal on which the personal information (full name, identity number in the case of a natural person or registration number in the case of a juristic person, address, tax registration number and contact details) of the following parties must be recorded and submitted:
This information must not only be disclosed to the Master, but trustees are also required to keep the information on hand for their own records. The Master’s portal currently in use is considered a temporary system due to uncertainty as to whether the portal in its current format provides sufficient protection as required by the Personal Information Protection Act 4 of 2013 but will stay in use until a more formal system is implemented. Efforts are being made to obtain the necessary clarification on this matter before confidential information of trusts and eligible stakeholders is delivered to the Master.
ASL Trust is in the process of coordinating this disclosure to the Master of the High Court and ensuring that the trustees comply with their obligations in this regard, particularly where ASL Trust has been appointed as the independant trustee.
Tax on trust distributions
The intended IT3(t) certificates that trusts must issue to SARS in the near future will enable SARS and the Master to build a more coordinated database of trusts that are registered with the Master, but not registered on the SARS’ system accordingly. (To refresh your memory on what the new tax reporting requirements for trusts entail, please read the article from our April newsletter at the following link.
The IT3(t) information will form part of the so-called “third party reporting project” and will work similarily to the system currently in place between SARS and various financial service providers to ensure that tax information is accurately and recorded fully on annual tax returns of trust beneficiaries.
According to SARS, the following information must be recorded on the IT3(t):
SARS is running various tests on the data system with a focused trial period currently scheduled from 14 August 2023 to 8 September 2023, with submissions commencing on 18 September 2023 in relation to the February 2023 tax year. These are provisional dates and more formal communication and confirmation will be given as and when it is received from SARS.
The effect of the full implementation of the above is that trusts’ accounting records must be updated on a continuous basis in order to ensure that the trust’s taxable income can be calculated before the end of the financial year. This will also enable trustees to exercise their discretion as to whether they want to distribute the taxable income to beneficiaries, and if so, to whom and how much, before the last day of February.