The 2020 National Budget tabled in Parliament on 26 February by Finance Minister, Tito Mboweni, held no surprises on any matters impacting the fiduciary industry.
No changes were made to estate duty, donations tax or capital gains tax.
The fact that the standard deduction for estate duty (R3.5m) has not been increased again has the effect that the monetary relief of this deduction has been seriously eroded. It is more than ten years since this amount was last deducted.
Similarly, the year of death exclusion for CGT of R300,000 has not changed since March 2012.
On p132 of the Full Budget Review published by the National Treasury on 26 February is a paragraph about preference share schemes used to avoid the consequences of section 7C of the Income Tax Act, 58 of 1962 with regard to interest-free loans to companies owned by trusts. The paragraph states that legislation to prevent this tax avoidance will be introduced via the Taxation Laws Amendment Bill, which will be published for public comment around the middle of this year.
(It is unclear how the legislation will be framed but the pref share scheme is quite complex, so may be difficult for lay people to understand – but it came about as a result of Sec 7C, which rules that foregone interest on any soft loan to a company or trust is deemed to be a donation by the individual to the company or trust, and potentially subject to donations tax. The scheme avoids this. It was probably only a question of time before Treasury would have wanted to close it down.