Capital Gains Tax: Trusts vs Individuals
06 December 2013
Posted by: Author: Rigard Sevenster
Author: Rigard Sevenster (MoneywebTax)
Many financial planners, and the general public at large, have expressed concern regarding when and to what extent they or their trust is liable for capital gains tax (CGT). Knowing the different tax treatments will assist in choosing how to structure your estate and trust more effectively.
In this article we highlight some of the most important differences in CGT from either a trust or an individual's perspective.
Tax rates at a glance
As most people are aware, a normal trust is taxed on all taxable income at a fixed rate of 40%, whereas individuals earning above the threshold are taxed at their personal marginal rate, ranging between 18% to 40%, and qualify for certain exemptions and rebates.
When a capital gain is realised within a trust, 66.6% of that gain has to be included for income tax purposes (taxed at 40% as stated), effectively meaning that a trust's CGT is 26.7%. A trust has no yearly exclusion.
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This article was first published on moneywebtax.co.za