Trusts Glossary: South African Trust & Tax Terms A–Z [2026]

A–Z of trust & restructuring terms

Definitions are general information, not legal advice. For the figures behind the tax terms, see the 2026 rates reference; for the authorities, the source library.

Trust

A legal arrangement, governed by the Trust Property Control Act 57 of 1988, in which a founder transfers assets to trustees who hold and administer them for beneficiaries. A trust is not a separate legal person in the way a company is (the trustees act in their representative capacity), although tax and other legislation can treat a trust as a person or taxpayer for a stated purpose. In an ownership trust the trustees hold title to the assets; in a bewind trust the beneficiaries own them and the trustees only administer them. The draft Regulation of Trusts Bill 2026 would repeal the Trust Property Control Act and replace it (draft clause 37); it is not yet law. See the draft Regulation of Trusts Bill 2026.

Founder (settlor / donor)

The person who creates the trust and puts the first assets or funding into it. South African tax law watches the founder closely, because donations and loans by the founder can pull income and gains back to them under the attribution rules and section 7C.

Trustee

A person who holds and manages trust property for the beneficiaries. Trustees owe a statutory duty of care (TPCA s 9) and may act only once the Master of the High Court has issued Letters of Authority. The draft Regulation of Trusts Bill 2026 would also measure the duty of care against any special knowledge or experience the trustee has or holds out as having (draft clause 15(1)); it is not yet law. See the draft Regulation of Trusts Bill 2026.

Independent trustee

A trustee who is not the founder, a beneficiary or a family member of either, has no personal interest in the trust property, and actually exercises independent judgment. The Trust Property Control Act does not require one; the Supreme Court of Appeal in Parker urged the Master to insist on one where all the trustees are related beneficiaries, and the Master’s Office applies that in practice. Appointing one, and minuting real decisions, helps avoid the trust being treated as the founder’s alter ego. The draft Regulation of Trusts Bill 2026 would give the Master an express power to appoint an independent trustee, despite the deed, where all the trustees are beneficiaries, all are related to one another and the trust trades with third parties (draft clause 10(4)), after consulting the trustees and vested beneficiaries (draft clause 10(5)); it is not yet law. See Parker [2004] ZASCA 56; the draft Regulation of Trusts Bill 2026.

Beneficiary

A person who may benefit from the trust. Under the Income Tax Act (s 1(1)) a beneficiary is anyone with a vested or contingent interest in the receipts, accruals or assets of the trust.

Vested right

An established entitlement to trust income or capital. Payment may still be postponed by the trust deed, so whether payment can be demanded now depends on whether it is due. Income vested in a resident beneficiary in the year it is earned is taxed in that beneficiary’s hands under the conduit principle, even if it is only paid out later.

Discretionary (contingent) right

A mere hope (spes) of benefiting, dependent on the trustees exercising their discretion or on a future event such as reaching a set age. A discretionary beneficiary cannot ordinarily demand a particular distribution, but can insist on proper administration and challenge an unlawful exercise of the trustees’ discretion.

Inter vivos trust

A “living” trust created during the founder’s lifetime by a trust deed (the trust instrument). The deed is lodged with the Master, who must authorise each trustee in writing before that trustee may act — creation of the trust and authorisation of the trustees are two different events. It is the structure used for most asset-protection and estate-planning trusts.

Testamentary trust

A trust created by a will that comes into existence on the testator’s death, commonly used to administer an inheritance for minor children or a vulnerable dependant until the age or event the will specifies. A minor can inherit and own property; the trust supplies the administration.

Special trust

A trust defined in the Income Tax Act (s 1(1)) for tax purposes: paragraph (a) is a disability trust (for a person with a disability as defined in s 6B, inter vivos or testamentary); paragraph (b) is a testamentary trust for a deceased’s relatives where the youngest is under 18. A special trust is taxed on the individual sliding scale, not the flat 45%.

Bewind trust

A trust in which the beneficiaries own the trust assets and the trustees merely administer them — the reverse of the usual structure. Income and gains are taxed in the beneficiaries’ hands.

Master of the High Court

The official who registers inter vivos trusts, issues Letters of Authority to trustees, and holds the trust’s beneficial-ownership register. The draft Regulation of Trusts Bill 2026 would add an annual return filed with the Master (draft clause 21), let the Master call for a trust’s annual financial statements (draft clause 20(6)), and give the Master compliance notices and administrative fines (draft clauses 33 and 34); it is not yet law. See the draft Regulation of Trusts Bill 2026.

Letters of Authority

The document the Master issues authorising a trustee to act. Trustees who act before receiving Letters of Authority may find their actions void and may be personally liable. The draft Regulation of Trusts Bill 2026 would keep the rule that a trustee may act only if authorised in writing by the Master (draft clause 8(1)); it is not yet law. See the draft Regulation of Trusts Bill 2026.

Trust deed

The founding document that identifies the founder, trustees and beneficiaries, describes the trust property, and sets out the trustees’ powers, the decision-making rules and the trust’s duration.

Conduit principle

The rule that a trust is a conduit (pipe): income or a capital gain that a resident trust vests in a resident beneficiary in the same year is taxed in the beneficiary’s hands, not the trust’s (section 25B for income; paragraph 80 of the Eighth Schedule for capital gains). For years of assessment starting on or after 1 March 2026, section 25B(1) (as substituted by the Taxation Laws Amendment Act 5 of 2026) is expressly subject to the attribution rules in section 7(2) to (8) and has two limbs: a resident trust’s income flows through only to a resident beneficiary with a vested right — income vested in a non-resident beneficiary is taxed in the trust — while a non-resident trust’s income flows through to any ascertained beneficiary with a vested right.

Attribution rules

Anti-avoidance rules (section 7 and Eighth Schedule paragraphs 68–72) that tax income or gains in the hands of the founder where they reach a beneficiary because of a donation, settlement or other disposition by the founder — at their sharpest for minor children. For years of assessment starting on or after 1 March 2026 (Taxation Laws Amendment Act 5 of 2026), section 7(5) — income held back until a future event — applies only if the donor is a resident when the income accrues or is received, whichever is earlier, and section 7(6) — a retained power to revoke a beneficiary’s income right or give it to someone else — only while the donor keeps that power and is a resident.

Connected person

A defined relationship (Income Tax Act s 1(1)). In relation to a trust, every beneficiary — and anyone connected to a beneficiary — is a connected person, so a founder, the trust, its beneficiaries and a company in which the trust holds at least 20% of the shares or votes are almost always connected to one another. Connectedness is the gateway to rules such as section 7C and paragraph 38 of the Eighth Schedule; each rule then has its own further requirements, and connected persons can still deal with one another at a properly supported market price.

Asset-for-share transaction (section 42)

A corporate roll-over: a person transfers an asset to a resident company and receives equity shares in return, with no immediate capital gains tax, provided they hold a qualifying interest. The company inherits the asset’s base cost, so the gain is deferred, not forgiven.

Roll-over relief (sections 41–47)

The Part III rules that defer tax on a genuine reorganisation — asset-for-share (s 42), amalgamation (s 44), intra-group (s 45), unbundling (s 46) and liquidation distribution (s 47) — by having the parties step into each other’s base cost. From 1 January 2027 the Taxation Laws Amendment Act 5 of 2026 removes collective-investment-scheme portfolios from the section 41 definitions of “company” and “equity share” for section 42 purposes, and deletes paragraphs (b) and (e) of the section 42 definition of “qualifying interest”. See section 42 in depth.

Qualifying interest

The shareholding a transferor must hold for section 42 to apply. For an unlisted company it is at least 10% of the equity shares and at least 10% of the voting rights.

Base cost

The amount subtracted from proceeds to work out a capital gain — broadly what was paid for the asset plus qualifying costs. Under a section 42 transfer, the company takes over the transferor’s base cost.

Donations tax

A 20% tax (25% on the cumulative value above R30 million) on the value of anything given away for nothing or for too little. The donor pays. Natural persons have an annual exemption that SARS currently publishes as R150,000 (clause 9 of the 2026 Draft Rates Bill, deemed effective 1 March 2026; the promulgated amendment has not been located).

Section 7C

The anti-avoidance rule for an interest-free or low-interest loan to a trust (or to a company in which the trust holds at least 20%). The difference between the interest the trust actually incurs and interest at the official rate is treated as a donation on the last day of each year of assessment, so the loan carries an annual donations-tax cost for as long as it stays outstanding.

Official rate of interest

The South African repo rate plus one percentage point, applied from the first day of the month after a repo change — 8.25% from 1 October 2026 (repo 7.25% from 25 September 2026); it was 8% from 1 June to 30 September 2026. It is used to calculate the section 7C deemed donation. SARS’s Table 3 (June 2026 issue) had not yet been reissued for the September change at 29 September 2026.

Estate duty

A duty of 20% on the dutiable estate up to R30 million and 25% above, levied on death. Putting growth assets under a trust can cap the founder’s estate at what was taken out — usually a loan account, which stays in the estate and must be valued at death.

Capital gains tax (CGT)

Tax on the gain when an asset is disposed of. Maximum effective rates: up to 18% for individuals and special trusts, 21.6% for companies, and 36% for ordinary trusts. The ordinary-trust rate is 36%, not 18%.

Inclusion rate

The portion of a capital gain that is included in taxable income before the income-tax rate is applied — 40% for individuals and special trusts, 80% for companies and ordinary trusts.

Dividends tax

A 20% tax withheld when a company pays a dividend (for example, when a Newco passes profit up to the trust). The conduit principle does not switch it off.

Securities transfer tax (STT)

A 0.25% tax on transferring shares — relevant when a Newco’s shares move to the trust. An issue of new shares is not a transfer; transfers under the Part III roll-over rules are exempt; and where the shares are in a residential property company and the acquisition is subject to transfer duty, STT is exempt under s 8(1)(n) so the two taxes are not charged on the same acquisition.

Transfer duty

A tax on acquiring property, on a sliding scale from 0% (up to R1.21 million) to 13% (above R13.31 million). A qualifying section 42 asset-for-share transfer can be exempt under section 9(1)(l)(i) of the Transfer Duty Act on the public officer’s affidavit, or under section 9(15A) where VAT vendors are deemed one person under section 8(25) of the VAT Act. Each exemption is tested on its own wording; a roll-over does not make every related transfer duty-free.

Residential property company

A company (other than a REIT) that holds residential property whose fair value is more than 50% of the fair market value of all its assets — excluding financial instruments and gold or platinum coins — measured on the date an interest in it is acquired. Acquiring a share or member’s interest in such a company is an acquisition of “property” for transfer duty, so it is taxed as if you bought the property; a partial acquisition is dutiable in proportion.

Solvency and liquidity test

The Companies Act s 4 test a company’s board must pass before making any distribution — its fairly-valued assets must equal or exceed its liabilities, and it must appear able to pay its debts as they fall due for the next 12 months.

Beneficial owner

For a trust, the natural persons listed in section 1 of the Trust Property Control Act: whoever ultimately owns the trust property or effectively controls its administration, plus each founder, each trustee and each beneficiary named in the deed. It is a role-based statutory list, not only the people who economically benefit. Both the trust (at the Master, TPCA s 11A) and the company (at CIPC) must keep a register of their beneficial owners. The draft Regulation of Trusts Bill 2026 would require a change to the trust’s beneficial-ownership record to be updated and lodged with the Master within 10 days (draft clause 23(1)(d)), and would let a trustee lodge an amendment to the trust deed only if that information is lodged and up to date (draft clause 6(4)); it is not yet law. See the draft Regulation of Trusts Bill 2026.

IT3(t)

The annual third-party return a resident trust files with SARS (due 30 September 2026 for the 2026 year), reporting every amount it vested in a beneficiary. SARS’s position, as recorded in SAICA’s IT3(t) guidance (updated 18 September 2024), is that from the 2025 year of assessment all amounts, including R0, should be disclosed — so file one even where nothing was vested. SARS uses it to check beneficiaries’ returns, but a reported amount is not automatically taxable in the beneficiary’s hands — capital, exempt amounts and amounts attributed to another taxpayer follow their own rules. See SAICA IT3(t) guidance (18 September 2024).

ITR12T

The annual income tax return for a trust, filed in addition to the IT3(t). Every registered trust must file one each year, even if it was dormant; for the 2026 season it opens on 19 September 2026 and closes on 22 January 2027.

Alter-ego trust

A validly created trust that the founder nonetheless runs as an extension of themselves — dictating trustee decisions and using trust assets as their own. The abuse does not by itself make the trust invalid; the remedy depends on what is proved. On divorce, trust assets can be counted in a spouse’s estate where that spouse had de facto control of the trust and, but for the trust, would have owned the assets himself or herself (Badenhorst v Badenhorst). Where trustees ignore the deed, a court can hold them to it or, in a suitable case, treat the trust form as a veneer that should be pierced so that creditors can reach the assets (Land and Agricultural Development Bank v Parker, which stresses keeping control of the trust separate from enjoyment of its benefits). See Badenhorst v Badenhorst [2005] ZASCA 116; Parker [2004] ZASCA 56.

Sham (simulated) trust

An arrangement where the parties never genuinely intended to create a trust at all, so no trust came into existence and the assets never left the founder. Different again from an alter-ego trust and from a simulated transaction attacked under the NWK test; each label has its own defect and its own consequences, and none of them automatically reverses every tax and property result.

Newco

A newly formed private company used to hold an asset (such as property) beneath a trust in a trust-and-company structure.

Loan account

The amount a founder is owed after selling an asset or shares to the trust on credit. It stays an asset of the founder’s estate, and if interest-free or low-interest it triggers section 7C.