Trusts: tax changes put on hold
Proposals announced in the Budget Review to change how discretionary trusts are taxed have not been included in the Taxation Laws Amendment Bill that was published for comment this week.
In the Budget Review in February, National Treasury said it intended to introduce proposals to treat capital gains distributed by trusts as ordinary income – a move that trust experts said threatened to make the use of discretionary trusts punitive from a tax point of view.
Treasury’s deputy directorgeneral, Ismail Momoniat, says initial consultations indicated that Treasury needed more time to consult. Treasury will issue a discussion paper on the taxation of trusts later this year, he says.
The Budget Review indicated that the intention of the proposals is to stop taxpayers from using discretionary trusts to avoid tax.
The Taxation Laws Amendment Bill does, however, contain proposals to amend tax law provisions intended to prevent taxpayers from disguising part of their salaries, which attract higher tax, as payments from employee share schemes, which attract lower tax.
The explanatory memorandum to the bill says the distinction made between equity and non-equity shares issued to employees on a restricted-access basis will be removed. – Laura du Preez