What a trust is
A trust separates control of property from enjoyment of it. In the usual ownership trust the trustees hold title to the assets in their representative capacity and contract on the trust’s behalf; in a bewind trust the beneficiaries own the assets and the trustees only administer them. A trust is not a separate legal person in the way a company is, although tax legislation treats it as a taxpayer. The Act defines both forms:
“trust” means the arrangement through which the ownership in property of one person is by virtue of a trust instrument made over or bequeathed— (a) to another person, the trustee, in whole or in part, to be administered or disposed of according to the provisions of the trust instrument for the benefit of the person or class of persons designated in the trust instrument or for the achievement of the object stated in the trust instrument; or (b) to the beneficiaries designated in the trust instrument, which property is placed under the control of another person, the trustee, to be administered or disposed of according to the provisions of the trust instrument for the benefit of the person or class of persons designated in the trust instrument or for the achievement of the object stated in the trust instrument, …
Creating the trust and authorising the trustees are two different events. The trust comes into being under its founding instrument — a written deed, a will or a court order. The instrument is then lodged with the Master of the High Court, who issues Letters of Authority; until the Master has authorised a trustee in writing, that person simply may not act for the trust:
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 may also be a trustee and a beneficiary. What must be avoided is one person being both the sole trustee and the sole beneficiary; the deed, the Master’s requirements and each trustee’s written authority decide who must be in office.
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. The leading authority on that separation is Parker, where the Supreme Court of Appeal also warned that trustees who ignore the deed and bind the trust on their own authority may show that “the trust form is a veneer that in justice should be pierced in the interests of creditors” (at [37.3]):
The alter ego test comes from a different case. In Badenhorst v Badenhorst, a divorce, the Supreme Court of Appeal counted a trust’s assets as the husband’s own for the redistribution order, because he controlled the trust in fact and, but for the trust, would have owned the assets himself:
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% on the taxable income it retains (after exemptions, deductions and the allocation rules — not on every rand received) and capital gains tax at an effective 36% (an 80% inclusion rate at 45%). That is not 18% — 18% is the maximum effective rate for an individual or special trust. 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: for a South African (resident) trust, income vested in a resident beneficiary is deemed to accrue to that beneficiary; whatever the trustees retain, or vest in a non-resident, is deemed to accrue to the trust. A non-resident trust has its own limb, which lets income flow to any beneficiary with a vested right:
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 (2) to (8),— (a) where that trust is a resident, 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; or (b) where that trust is not a resident, to the extent to which that amount has been derived for the immediate or future benefit of any ascertained beneficiary, who 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 — This text applies to years of assessment starting on or after 1 March 2026. The opening words “subject to the provisions of section 7 (2) to (8)” are the hinge to the attribution rules — even a textbook conduit can be overridden and the income taxed back in the founder’s hands. The same Act (s 3(1)) narrowed two of those rules for the same years: s 7(5) now attributes income to the donor only if the donor is a resident when it accrues or is received (whichever is earlier), and s 7(6) only while the donor keeps the power to revoke or redirect the beneficiary’s right and is a resident.
| Tax | Applies to | Rate (2026) |
|---|---|---|
| Income tax — trust | Taxable 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, on the sliding scale) | Up to 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. shares in a trading company that is not a residential property company. Exempt under s 8(1)(n) of the STT Act where the unlisted security is an acquisition of “property” subject to transfer duty (or a supply subject to VAT) — as it is when Newco is a residential property company and the trust buys its shares | 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 + 1%; 7.75% 1 Dec 2025–31 May 2026; 8% 1 Jun–30 Sep 2026) | 8.25% (from 1 Oct 2026) |
| Transfer duty | Acquiring property — sliding scale | 0% to R1.21m … 13% above R13.31m |
Last reviewed: 29 September 2026. Rates are South African and time-sensitive. The R150 000 / R20 000 donations-tax exemptions are the figures SARS currently publishes; they come from clause 9 of the 2026 Draft Rates Bill (deemed effective 1 March 2026) and we have not located the promulgated amendment, so treat them as SARS-published rather than quoted statute. The official rate of interest changes with the repo rate, so a section 7C figure must follow the rate for each period. A special trust is taxed on the individual sliding scale (CGT up to 18%), not the flat 45% / 36% that applies to an ordinary trust; the 18% figure is a maximum effective rate, not a flat rate on every gain. 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. Each of those outcomes depends on the facts — the validity and timing of the transfers, the loan claim he keeps, and the trust being genuinely administered — not on the structure alone. 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 was reviewed on 29 September 2026 and should be confirmed against the latest legislation and SARS material before acting.