What a trust is
A trust separates legal ownership (held by the trustees) from beneficial enjoyment (the beneficiaries). It is not a separate legal person like a company; the trustees, acting in their representative capacity, own the trust property and contract on the trust’s behalf. Every inter vivos trust must be registered with the Master of the High Court, who issues Letters of Authority before the trustees may lawfully act. This is not a formality — until the Master has authorised a trustee in writing, that person simply may not act for the trust at all:
Any person whose appointment as trustee in terms of a trust instrument, section 7 or a court order comes into force after the commencement of this Act, shall act in that capacity only if authorized thereto in writing by the Master.
The three parties to a South African trust
Governed by the Trust Property Control Act 57 of 1988. The founder can also serve as a trustee, but not as the sole trustee or sole beneficiary.
That separation of ownership from enjoyment is the whole point of a trust — and the single biggest trap. Where the founder controls everything and the other trustees are figureheads, the line between owning and enjoying the property collapses, and a court may treat the trust as the founder’s alter ego and disregard it. The leading authority is Parker:
The practical lesson — appoint at least one genuinely independent trustee and minute real decisions — runs through trustees’ duties. Start with the foundations: the types of trust, the three parties, how to register one, and whether a trust is right for you.
Two paths: a family trust, or a trust-and-company structure
Most people start with an ordinary family trust — to hold the family home, protect assets and provide for children across generations. A second, more advanced path is the trust-and-company structure: a company (a Newco) owns the asset, and a discretionary trust owns the shares in that company. That structure is built with the corporate roll-over rules — chiefly the section 42 asset-for-share transaction — and is funded by a donation or a loan (which brings in section 7C). Our restructuring guide walks through it end-to-end.
How trusts are taxed (the headline)
Tax is the heart of trust planning — and the most misunderstood part. An ordinary trust pays income tax at a flat 45% and capital gains tax at an effective 36% (an 80% inclusion rate at 45%). That is not 18% — 18% is the top rate for an individual. The planning therefore relies on the conduit principle (vesting income or gains in beneficiaries so they are taxed at lower rates) — subject to the attribution rules that can push the tax back to the founder. The conduit lives in the actual words of the Act: income vested in a resident beneficiary is deemed to accrue to that beneficiary; whatever the trustees retain is deemed to accrue to the trust:
Any amount (other than an amount of a capital nature which is not included in gross income or an amount contemplated in paragraph 3B of the Second Schedule) received by or accrued to or in favour of any person during any year of assessment in his or her capacity as the trustee of a trust, shall, subject to the provisions of section 7, to the extent to which that amount has been derived for the immediate or future benefit of any ascertained beneficiary, who is a resident and has a vested right to that amount during that year, be deemed to be an amount which has accrued to that beneficiary, and to the extent to which that amount is not so derived, be deemed to be an amount which has accrued to that trust.
Note — The opening words “subject to the provisions of section 7” are the hinge to the attribution rules — even a textbook conduit can be overridden and the income taxed back in the founder’s hands.
| Tax | Applies to | Rate (2026) |
|---|---|---|
| Income tax — trust | Income retained in an ordinary trust | 45% (flat) |
| Income tax — company | Newco's rental / trading profit | 27% |
| Income tax — individual | Income vested in a resident beneficiary | Up to 45% (sliding scale) |
| CGT — trust | Gain retained in an ordinary trust (80% inclusion) | 36% effective |
| CGT — company | Gain in a company (80% inclusion) | 21.6% effective |
| CGT — individual / special trust | Gain in a person / special trust (40% inclusion) | 18% effective |
| Dividends tax | Company pays a dividend upward | 20% |
| Donations tax | Gifts / s 7C deemed donations (25% over R30m cumulative) | 20% |
| Estate duty | Dutiable estate on death (25% over R30m) | 20% |
| Securities transfer tax | Transfer of shares (e.g. Newco shares to the trust) | 0.25% |
| VAT | Standard-rated supplies (e.g. commercial property by a vendor) | 15% |
| Official rate of interest | s 7C deemed donation on low/no-interest loans (repo 7% + 1%) | 8% (from 1 Jun 2026) |
| Transfer duty | Acquiring property — sliding scale | 0% to R1.21m … 13% above R13.31m |
Last reviewed: 3 June 2026. Rates are South African and time-sensitive; 2026 Budget measures (donations-tax exemption increases, resident-spouse limitation) are subject to Parliament's legislative process. A special trust is taxed on the individual sliding scale (CGT 18%), not the flat 45% / 36% that applies to an ordinary trust. Confirm every figure against the current SARS material before acting.
Read the full explanation on how trusts are taxed, or the one-page 2026 rates reference.
A running example: the Nkosi family
Throughout the restructuring guide we follow one family. Thabo Nkosi owns a rental property worth about R6 million that he bought for R2 million (a built-in R4 million gain), with a R1 million bond. He wants to keep the property safe from business risk, stop its growth inflating his estate, and provide for his wife and two young children. His adviser proposes the classic structure: form a Newco to hold the property, and a discretionary family trust to hold Newco’s shares. We follow that decision — and every tax that shapes it — through the restructuring guide.
This hub is general information, not legal or tax advice for your specific matter. Every figure is current to 3 June 2026 and should be confirmed against the latest legislation and SARS material before acting.