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 annual section 7C cost, transfer duty, 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 and register the trust deed; appoint trustees including at least one genuinely independent trustee; and obtain letters of authority from the Master before the trustees do anything. The independent-trustee point is not cosmetic — it is what keeps the trust from being treated as the founder’s alter ego. The Trust Property Control Act sets a non-excludable standard of care:
(1) A trustee shall in the performance of his duties and the exercise of his powers act with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another. (2) Any provision contained in a trust instrument shall be void in so far as it would have the effect of exempting a trustee from or indemnifying him against liability for breach of trust where he fails to show the degree of care, diligence and skill as required in subsection (1).
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).
(1) A trustee must— (a) establish and record the beneficial ownership of the trust; (b) keep a record of the prescribed information relating to the beneficial owners of the trust; (c) lodge a register of the prescribed information on the beneficial owners of the trust with the Master’s Office; and (d) ensure that the prescribed information … is kept up to date.
Note — Inserted by the General Laws Amendment Act 22 of 2022.
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.
5. Move the property in under section 42
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 VAT status. For a residential rental moved in by a non-VAT-vendor transferor, the route is section 9(1)(l)(i) of the Transfer Duty Act. Only where both parties are VAT vendors in a going-concern supply do you use section 9(15A) plus section 8(25) of the VAT Act — and that route requires the public officer’s sworn affidavit:
The exemption applies where fixed property is acquired as a result of an asset-for-share transaction as contemplated in section 42 of the Income Tax Act. The exemption is limited to immovable property where the supplier and the recipient of that property are deemed to be one and the same person under section 8(25) of the VAT Act. The public officer of the company is required to submit a sworn affidavit or solemn declaration that the provisions of section 8(25) of the VAT Act and section 42 of the Income Tax Act apply …
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
Decide donation versus loan. A donation is clean but attracts donations tax now (20%, rising to 25% on cumulative donations above R30 million). A loan attracts no tax up front but, 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. That exemption is now R150,000 for natural persons (and R20,000 for casual gifts by non-natural persons), announced in the 2026 Budget and subject to Parliament’s legislative process. The official rate of interest is 8% from 1 June 2026 (repo 7% + 1%).
If a trust or company incurs— (a) no interest in respect of a loan, advance or credit referred to in subsection (1) …; or (b) interest at a rate lower than the official rate of interest, an amount equal to the difference between the amount incurred … as interest … and the amount that would have been incurred … at the official rate of interest must, for purposes of [the donations tax Part], be treated as a donation made to that trust or company by the [lender] on the last day of that year of assessment …
7. Respect the 18-month window
Do not move the section 42 shares to the trust until 18 months have passed. For a capital-held rental the section 42(5) ordinary-income clawback is gated on the >50% allowance-asset/trading-stock test and generally does not bite; the real exposure is section 42(7) ring-fencing if Newco on-sells the property early. Letting the window run before transferring the shares remains the conservative discipline — the section 42 page sets out exactly which rule applies.
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. Keeping trust property separate from any trustee’s own affairs is a statutory duty:
Whenever a person receives money or other movable property in his capacity as trustee, he shall deposit such money and shall register or keep such other property or cause it to be registered or kept in such a manner as to indicate clearly that it is trust property …
9. Run annual compliance
Pass and minute the solvency-and-liquidity test before any distribution; file the trust ITR12T and the IT3(t) by 30 September; lodge any IT144 donations-tax returns; and keep both beneficial-ownership registers current. Newco may only distribute once its board has applied the test and acknowledged that it did:
… a company satisfies the solvency and liquidity test … if, considering all reasonably foreseeable financial circumstances …— (a) the assets of the company, as fairly valued, equal or exceed the liabilities …; and (b) it appears that the company will be able to pay its debts as they become due … for a period of— (i) 12 months after the date on which the test is considered; or (ii) in the case of a distribution …, 12 months following that distribution.
A company must not make any proposed distribution unless— (a) the distribution— … (ii) [is] authorised … by resolution …; (b) it reasonably appears that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution; and (c) the board … has acknowledged that it has applied the solvency and liquidity test …
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
Work in order: model the numbers; settle the trust (deed, an independent trustee, letters of authority); lodge the trust beneficial-ownership register under TPCA s 11A; incorporate Newco and file its CIPC register; move the property in under section 42; document the funding; let the 18 months run; put governance in place; then run annual compliance and review yearly.
Order matters because each step is a precondition for the next. Trustees cannot act until the Master issues letters of authority; the trust register needs trustees first; Newco needs an owner identified before incorporation; and the section 42 transfer should be modelled and the entities in place before conveyancing. Always model the numbers first before committing.
No. The conservative discipline is to let 18 months run before moving the Newco shares to the trust. For a capital-held rental the s 42(5) clawback generally does not bite, but the genuine exposure is s 42(7) ring-fencing if Newco on-sells the property within 18 months. See the section 42 page for the detail.
Each year: the board passes and minutes the solvency-and-liquidity test before any distribution (Companies Act ss 4 and 46); the trust files its ITR12T and IT3(t) by 30 September; any IT144 donations-tax returns are lodged; and both beneficial-ownership registers are kept current. Then review the official rate, exemptions, residency and section 7C yearly.
For a going-concern transfer between two VAT vendors, the s 9(15A) exemption needs the company’s public officer to file a sworn affidavit that s 8(25) of the VAT Act and s 42 apply. A non-VAT-vendor residential transfer instead uses the s 9(1)(l)(i) Transfer Duty Act route — see the transfer-duty detail.