Trust-and-Company Structure: Implementation Checklist (South Africa) [2026]

Why the order matters

The trust-and-company structure is built one dependency at a time, and getting the sequence wrong is expensive. Trustees cannot act until the Master issues letters of authority; the trust’s beneficial-ownership register cannot be lodged until there are trustees to lodge it; Newco needs an owner identified before it is incorporated; and the section 42 transfer should be modelled and the entities in place before any conveyancer opens a file. Each of the ten steps below carries the tax or legal consequence that makes its position in the sequence non-negotiable.

Building the structure (steps 1–5)

The first five steps create the legal scaffolding and move the asset in. Do not start them until the model in step 1 shows the long-term benefit outweighs the immediate and ongoing cost.

1. Model the numbers first

Quantify the deferred CGT, the CGT on the later transfer of the shares to the trust (a disposal at market value in the founder’s hands), the transfer duty on the trust’s acquisition of residential-property-company shares (STT exempt under s 8(1)(n)), the annual section 7C cost, dividends tax and the estate-duty saving before committing. If the ongoing section 7C cost outweighs the benefit, reconsider. This is the same discipline the whole restructuring guide turns on.

2. Settle the trust

Draft the trust deed and lodge it with the Master that has jurisdiction (the Master in whose area the greater portion of the trust property is situated, s 3); appoint trustees who are not disqualified under s 6(1A), including at least one genuinely independent trustee; furnish security or obtain the exemption; and obtain letters of authority from the Master before the trustees do anything. Under Chief Master’s Directive 2 of 2025, a new trust falling under Master Pretoria or Master Johannesburg can be registered online (since 1 April 2025 — the Master may accept electronic copies of the documents, except the bond of security and any document it wants to verify against the original, and the trustees keep the originals), while the other Masters’ offices still take the original documents by post, courier or hand delivery. Letters of authority are now system-generated with a QR code (since 18 March 2025) and emailed, rather than physically signed. Then keep the deed’s minimum trustee complement in office and take every decision under its quorum and signature rules — letters of authority do not confer a power the deed omits. The independent-trustee point is not cosmetic — it is what keeps the trust from being treated as the founder’s alter ego, although appointing an independent trustee does not by itself cure defective administration. The Trust Property Control Act sets a non-excludable standard of care:

3. Lodge the trust’s beneficial-ownership register

Trustees must establish and lodge a beneficial-ownership register for the trust with the Master’s Office. This is one of two separate beneficial-ownership filings (the other is Newco’s, at CIPC, in step 4).

Lodgement is electronic only: the register is uploaded on the Master’s online Trust Beneficial Ownership Register system under Chief Master’s Directive 8 of 2023 — no hard copy is accepted, and reporting beneficial ownership to SARS does not count as lodging it with the Master. If the trust was registered on the Master’s online registration system in step 2, that system populates the Master’s register with the new trust’s details automatically; the trustees still check it and keep it current, updating it within a reasonable time after any change.

4. Incorporate Newco

Adopt the MOI; decide how the trust will come to hold the shares (subscription versus later transfer); and file Newco’s beneficial-ownership register with the Companies and Intellectual Property Commission (CIPC) under the Companies Act 71 of 2008. Since 1 July 2024 a company cannot file its annual return unless its beneficial-ownership filing for that year is in place. The annual return is not a substitute for keeping the records accurate: beneficial-ownership records must be updated when the relevant facts change, between annual submissions as well.

5. Move the property in under section 42

First confirm that section 42 actually applies. Check the parties’ eligibility and residence; the asset’s value and tax character in both hands; the issue of qualifying equity shares; the applicable qualifying-interest or full-time-service requirement; any cash, debt or other consideration; and the exclusions and subsequent-event rules. An ordinary family trust can be a transferor, but it cannot receive an asset under section 42 in place of the qualifying company.

Handle the conveyancing and obtain the bond consent; then secure the transfer-duty exemption by filing the affidavit for the route you are actually claiming. There are two exemption routes, and which one applies turns on which tax is in point. Where transfer duty (not VAT) is the tax on the transfer — the usual residential case — the route is the section 9(1)(l)(i) corporate-acquisition exemption in the Transfer Duty Act. Only where the parties are VAT vendors deemed one person under section 8(25) of the VAT Act (an enterprise sold as a going concern, or fixed property with a written leaseback) do you use section 9(15A) plus section 8(25) — and that route requires the public officer’s sworn affidavit:

5A. Calculate the second step before the first

Section 42 leaves the Newco shares with the founder. The plan needs them in the trust, and that transfer — a sale on loan account or a donation — is a disposal at market value with the deferred gain taxed in the founder’s own hands (on the Nkosi numbers a R4 million gain, about R711 000 of CGT, with no cash coming in on the loan route). That figure uses the R50 000 CGT annual exclusion — SARS-published, from clause 15 of the 2026 Draft Rates Bill; promulgated amendment not located. On the enacted R40 000 exclusion it would be about R712 800. The trust’s acquisition of shares in a residential property company attracts transfer duty on the property’s value (about R437 356), with STT exempt under s 8(1)(n). Record who owes what: the trust owes the founder for the shares; Newco owes him nothing merely because it holds the property. See the reconciled schedule on the trust-and-company structure page.

Funding and the 18-month window (steps 6–7)

With the entities in place and the property transferred, value has to move between the family and the structure — and the section 42 relief has to be protected for its first 18 months.

6. Document the funding

Two common ways to fund the structure are an outright donation and a loan. A donation removes the need for repayment but attracts donations tax now (20%, rising to 25% on cumulative donations above R30 million) and can carry disposal taxes and continuing attribution consequences. A loan attracts no donations tax up front, leaves a claim in the lender’s estate and, if interest-free or below the official rate, triggers an annual deemed donation under section 7C. Either way, paper the loan account properly and record use of the annual donations-tax exemption. SARS currently publishes that exemption as R150,000 for natural persons (and R20,000 for casual gifts by non-natural persons) — the figures in clause 9 of the 2026 Draft Rates Bill, deemed effective 1 March 2026; we have not located the promulgated amendment. The official rate of interest is 8.25% from 1 October 2026 (repo 7.25% + 1%, after the Reserve Bank raised the repo rate with effect from 25 September 2026); it was 8% from 1 June to 30 September 2026 and 7.75% from 1 December 2025 to 31 May 2026. SARS’s Table 3 had not been reissued for the September change at 29 September 2026 and still shows 8% from 1 June 2026. The section 7C figure follows the rate for each period of the year, not a single annual rate, and SARS’s table does not fix the rate for the rest of the tax year in advance — so any figure for the year is on the rates known at 29 September 2026, and a further repo change before 28 February 2027 changes it again. Where a figure comes from a Budget proposal or draft Bill, confirm its legislative status and commencement before the transaction is implemented (position checked 29 September 2026).

7. Respect the 18-month window

Section 42 has three separate 18-month rules, not one holding period. None of them is an absolute ban on acting within 18 months, and each must be tested on its own:

• Section 42(5) — an early sale of the shares. This applies only if more than 50% of the market value of the assets moved in is attributable to allowance assets or trading stock, measured as the subsection prescribes. Where it applies, the proceeds are taxed as income up to the shares’ market value at the start of the 18 months — not automatically the whole amount. For a capital-held rental on which no allowances were claimed it generally does not bite, and the share disposal is an ordinary CGT event.
• Section 42(6) — losing the qualifying interest. This can apply even without a sale. If the founder stops holding the qualifying interest within 18 months (a dilution can do it), the roll-over shares he still holds immediately afterwards are treated as sold and reacquired at their market value on the section 42 transaction date. The subsection has exceptions, including certain corporate-rule transactions, involuntary disposals and death. Where the founder disposes of all the shares and holds none afterwards, the actual disposal is taxed on its own calculation (including s 42(5) where it applies); a part-transfer that drops him below the threshold needs the s 42(6) check on the shares he keeps.
• Section 42(7) — Newco sells the property early. If the company disposes of the asset within 18 months, the subsection ring-fences the historic amount it specifies (broadly, the gain built in at the transfer date) so that it cannot be set off against other losses — it does not automatically apply to the whole later gain.

Letting 18 months run before transferring the shares remains the conservative discipline — the section 42 page sets out exactly which rule applies. It is not, however, an exemption for the transfer itself: see step 5A. Other time limits in the corporate rules are separate again. For sections 44 and 47, the required statutory steps must be taken within 36 months (or a longer period SARS allows) — which is not necessarily the date by which CIPC must have completed the process — and the section 45 six-year degrouping rule has its own tracing and calculation requirements. Do not read any of them as one general holding period.

Governance and annual compliance (steps 8–10)

A structure that is well designed on paper still fails if it is run carelessly. The last three steps are about running it — every year, indefinitely.

8. Put governance in place

Open a separate trust bank account, keep a minute book, and ensure trustee decisions are genuinely joint and independent. Tell every accountable institution (the bank, the conveyancer, an estate agent) that you deal as trustee and that the matter concerns trust property (s 10(2)), and keep the prescribed record of those institutions (s 11(1)(e)). Preserve the deed and every transaction record: the Act requires them for five years after the trust ends (s 17), separately from SARS’s own retention rules. Keeping trust money in a dedicated account — never run through a trustee’s own affairs — is a statutory duty:

Company-side approvals. A Newco director with a relevant personal financial interest in a matter — the founder is usually both a director and a trustee or beneficiary — must follow the disclosure and participation rules in section 75 of the Companies Act. A decision or transaction approved despite that interest is valid only through one of the statutory routes: approval following compliant disclosure, later ratification by an ordinary resolution of the shareholders after disclosure, or validation by a court (s 75(7)). A conflicted director may sign the relevant document only where the board has specifically requested or directed it (s 75(5)(g)). The special rule for a sole director who does not hold all the beneficial interests (s 75(3)) is distinct from the ordinary board procedure; do not assume the same shareholder approval is needed in every company with a founder-director and a trust shareholder.

Before Newco lends money, gives a guarantee or otherwise provides financial assistance, first establish whether section 44 or section 45 of the Companies Act applies and whether an exclusion or statutory alternative applies. Where the approval provisions apply, check shareholder authority, the board’s solvency and liquidity assessment, fair and reasonable terms, and the MOI requirements. Section 45(2A) excludes assistance by a company to or for the benefit of its subsidiaries from section 45; other duties and provisions must still be considered. The detail is on company-law housekeeping.

9. Run annual compliance

Pass and minute the solvency-and-liquidity test before any distribution; file the trust IT3(t) third-party return by 30 September (30 September 2026 this season; SARS’s position, as recorded by SAICA, is that from the 2025 year a nil (R0) return is filed where nothing was vested) and the ITR12T by the published season deadline (the 2026 season opens on 19 September 2026 and closes on 22 January 2027 for provisional and non-provisional trusts — every trust files one, active or passive, and administrative penalties for outstanding ITR12Ts have applied since 4 May 2026), and pay provisional tax on its own dates — check SARS’s calendar each year rather than carrying one date forward. For the 2026 season SARS’s notice of 18 September 2026 records that the IT3(t) now pre-populates the ITR12T’s vested-income sections and beneficiary schedules (so get the IT3(t) right first), that a new section tests the section 25B(4) to (6) limit on deductions against income vested in beneficiaries, and that the return now indicates that all trusts are required to file. Lodge any IT144 donations-tax returns; and keep both beneficial-ownership registers current — update them when the relevant facts change, because an annual return is not a substitute for accurate records between annual submissions. This step describes an ordinary family trust: check whether the trust falls within the current IT3(t) reporting requirements and exclusions (residence alone does not define who must file). Tax-return, third-party reporting and beneficial-ownership obligations are separate, and reporting a vesting does not by itself establish that section 25B or paragraph 80 shifts the tax to the beneficiary. Newco may only distribute once its board has applied the test and acknowledged that it did:

10. Review every year

Re-check the official rate of interest, the donations-tax exemption, the residency of beneficiaries, and any change in the section 7C final interpretation note or other law. The 2025 draft note on unpaid distributions as section 7C loans has not yet been finalised — track the final version, and revisit minor-beneficiary attribution once children turn 18 (the age of majority under the Children’s Act 38 of 2005, s 17).

Frequently asked questions