Tributum Newsletter #4
We all know that guy at work, you know, the one that always makes budget, lands the clients and saves the day. And why do you know him to be all that – because he tells you. According to James Kerr in his book “Legacy” many of New Zealand’s most popular rugby players never played for the All Black – because they were dickheads. Their wording, not mine.
The All Blacks believe that a player that makes the team great is better than a great player. No one is bigger than the team and individual performance means nothing if the team does not win. So, if you employ one of those guys – manage him better. If you work with one of those guys – try and get him to play for the team. If you are that guy – stop. No one wakes up in the morning to be an idiot – be better.
The perception that trusts are tax avoidance vehicles keep SARS’ eyes firmly focussed on these entities. Not only has the recent introduction of section 7C thrown the cat among the pigeons the trust tax returns have undergone significant changes over the past 3 years. The disclosure of connected party transactions and distributions provides SARS with so much more information to cross check against the disclosure of other taxpayers.
It should also be accepted that trusts are no longer the low or zero-sum tax vehicle that many people thought they were. Loans cannot simply be waived or donated to reduce the section 7C impact without possibly triggering debt waiver provisions. Distributions to non-resident beneficiaries will in most cases still attract tax in South Africa as it is from a South African source. The question is, in whose hands will it be taxed?Moreover, are these distributions disclosed by those beneficiaries in their country of tax residence? What are the tax consequences on these distributions in that country?
Therefore, understand that a trust is a financial planning tool and the Nil tax positions of the past are long gone. Understand that the trustees as a collective must be seen to control the trust assets and administration, not just a single person. Understand that a paper trail proving their involvement in decision making will be important. Understand that administration will be key.
Can you trust your trust? You surely don’t want to choke on an unexpected tax bill. We also hope the Proteas also don’t choke at the Cricket World Cup. Let the Protea fire burn bright to propel them to great heights and not to let them go down in a blaze of glory.