20 July 2012
Posted by: SAIT Technical
By Michael Stein (Friday Page)
The Draft Taxation Laws Amendment Bill, 2012 has been published for comment.
One of the proposed amendments to the Income Tax Act in the draft bill replaces the definition of a ‘special trust' in s1 of that Act. A special trust is taxed at the same rates as a natural person, but is not entitled to a primary abatement. The special trust for disabled beneficiaries also qualifies for certain capital gains tax concessions, for example, the annual exclusion and the special abatement allowed on the disposal of a primary residence. And both types of trust qualify for the CGT inclusion percentage available to a natural person
The proposed new definition, like the current one, provides for two types of special trust.
The first kind of trust is one created solely for the benefit of one or more persons who is or are persons with a ‘disability' (as defined in s18(3) of the Act, the deduction for medical expenses), where that disability incapacitates the person or persons from earning sufficient income for their maintenance or from managing their own financial affairs. A proviso states that the trust will be deemed not to be a special trust in years of assessment ending on or after the date on which all the persons concerned are deceased. When the trust is created for the benefit of more than one person, all persons for whose benefit the trust is created must be relatives of each other.
And the second type of trust is a testamentary or will trust created solely for the benefit of beneficiaries who are relatives of the deceased person and who are alive on the date of death of the deceased person (including a beneficiary who has been conceived but not yet born on that date). The trust will qualify as a special trust only if the youngest of the beneficiaries is on the last day of the trust's year of assessment under the age of 18 years. The current version of the definition has an age limit of 21 years.