Trusts: tax changes put on hold

Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

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

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