Why minor children are special
A trust normally works as a conduit: income and gains it vests in a resident beneficiary in the same year are taxed in that beneficiary’s hands, not the trust’s, often at a lower rate. Families are therefore tempted to vest income in young children to use their lower tax brackets. The attribution rules in section 7 and the Eighth Schedule exist to stop exactly that.
The conduit only delivers the tax to the child if the attribution rules do not first redirect it back to the donor. Where income or a gain reaches a beneficiary because of a donation, settlement or other disposition by the parent, the Act taxes the parent instead — and this is at its sharpest with minor children. (For the conduit principle generally, see how trusts are taxed.)
Two things switch the minor-child rules on: a parent-child relationship, and a donation, settlement or other disposition by that parent that causes the child to benefit. Take either away and the rule does not bite — which is the key to planning around it below.
Section 7(3): income of a minor child
Section 7(3) is the headline rule. If a parent’s donation, settlement or other disposition is the reason income reaches their minor child — whether it accrues to the child, is spent on the child’s maintenance, education or benefit, or is accumulated for the child — that income is deemed to be the parent’s and is taxed at the parent’s marginal rate.
Income shall be deemed to have been received by the parent of any minor child or stepchild, if by reason of any donation, settlement or other disposition made by that parent of that child— (a) it has been received by or has accrued to or in favour of that child or has been expended for the maintenance, education or benefit of that child; or (b) it has been accumulated for the benefit of that child.
Note how wide the trigger is: it is not only money paid to the child. Income spent on school fees, or simply accumulated inside the trust for the child, is caught just as firmly. A “minor child” here means a child under the age of majority — which is 18.
A child, whether male or female, becomes a major upon reaching the age of 18 years.
Paragraph 69: capital gain of a minor child
Capital gains have their own mirror rule. Paragraph 69 of the Eighth Schedule attributes a minor child’s capital gain to the parent in the same way section 7(3) attributes income — to the extent the gain can be traced to a donation, settlement or other disposition by the parent.
Where a minor child’s capital gain or a capital gain that has vested in … or that has been used for the benefit of that child … can be attributed wholly or partly to any donation, settlement or other disposition— (a) made by a parent of that child … so much of that gain as can be so attributed must be disregarded when determining that child’s … capital gain … and must be taken into account in determining the … capital gain … of that parent.
This is why paragraph 80 — the capital-gains conduit — is expressly subordinated to the attribution paragraphs. Its two limbs each open with the words “Subject to paragraphs 68, 69 and 71” (and, for vested gains, “Subject to paragraphs 64E, 68, 69 and 71”): the conduit hands the gain to the beneficiary only if those attribution paragraphs do not first claw it back to the donor (the person who made the relevant donation, settlement or other disposition).
Subject to paragraphs 64E, 68, 69 and 71, where a trust determines a capital gain in respect of the disposal of an asset in a year of assessment during which a beneficiary of that trust … who is a resident has a vested right … to an amount derived from that capital gain but not to the asset disposed of, an amount … (a) must be disregarded for the purpose of calculating the aggregate capital gain or aggregate capital loss of the trust; and (b) must be taken into account as a capital gain for the purpose of calculating the aggregate capital gain or aggregate capital loss of that beneficiary.
A gain attributed to the parent is taxed in the parent’s hands at an effective rate of up to 18% (the top individual CGT rate), not at the child’s — but crucially it does not get to ride the child’s lower brackets the way the family hoped.
Sections 7(5) and 7(6): conditional benefits and retained powers
Section 7(5) deals with a different timing trick. Where a person’s donation, settlement or other disposition holds income back behind a stipulation or condition — for example, “the beneficiary gets nothing until they reach 25” — the income that would otherwise have reached the beneficiary is taxed in the hands of the donor — the person who made that disposition, whether or not they are the trust’s founder — in the meantime, provided that person is a resident at the earlier of the accrual or receipt of that income.
If any person has made any donation, settlement or other disposition which is subject to a stipulation or condition, whether made or imposed by such person or anybody else, to the effect that the income or some portion of the income thereunder shall not be received by or accrue to the beneficiaries thereof or some of them until the happening of some event, whether fixed or contingent, so much of any income as would, but for such stipulation or condition, in consequence of the donation, settlement or other disposition be received by or accrue to or in favour of the beneficiaries, shall, until the happening of that event or the death of that person, whichever takes place first, be deemed to be the income of that person, provided that person is a resident at the earlier of the accrual or receipt of that income.
Note — Section 7(5) was substituted by s 3(1) of the Taxation Laws Amendment Act 5 of 2026 with effect from 1 March 2026 and applies to years of assessment commencing on or after that date. The substitution added the closing residence requirement — the words “provided that person is a resident at the earlier of the accrual or receipt of that income”. For an earlier year of assessment, read the wording that applied then.
Section 7(5) is not limited to minors: it follows the donor’s condition, not the beneficiary’s age. It is the reason a “hold everything until they are older” clause does not defer the tax — it simply parks the income on the donor’s return until the condition is met or the donor dies. Since 1 March 2026 the subsection carries its own residence test: it deems the income to be that person’s only if they are a South African resident at the earlier of the accrual or the receipt of that income, so a donor who is not a resident at that point falls outside this limb (other rules, including section 7(8), still need their own check).
Section 7(6) is its companion, aimed at retained powers. Where the deed lets the person who conferred a beneficiary’s right to income revoke that right or give it to someone else, the income is taxed in that person’s hands. It too was substituted from 1 March 2026, and now applies only while that person retains those powers and is a resident:
If any deed of donation, settlement or other disposition contains any stipulation that the right to receive any income thereby conferred may, under powers retained by the person by whom that right is conferred, be revoked or conferred upon another, so much of any income as in consequence of the donation, settlement or other disposition is received by or accrues to or in favour of the person on whom that right is conferred, shall be deemed to be the income of the person by whom it is conferred, provided that person retains those powers and is a resident.
Note — Substituted by s 3(1) of the Taxation Laws Amendment Act 5 of 2026 with effect from 1 March 2026, for years of assessment commencing on or after that date; the words “and is a resident” are the new residence test. Like s 7(5), it does not depend on the beneficiary’s age.
Worked example: vesting in the Nkosi children
What happens at 18 — and what does not stop
The minor-child rules are tied to minority. Section 7(3) and paragraph 69 attribute only while the child is a minor — under 18, the age of majority under the Children’s Act 38 of 2005. Once a child turns 18, those two specific rules fall away, and income or a gain vested in that now-adult child can be taxed in the child’s own hands through the conduit, provided the statutory conditions are met and no other attribution rule applies.
Section 7(8) is the cross-border limb. Where a resident’s donation, settlement or other disposition routes an amount to a non-resident — including an adult non-resident beneficiary — that would have been income in resident hands, the Act pulls it back into the resident’s income, again regardless of age.
Where by reason of or in consequence of any donation, settlement or other disposition … made by any resident, any amount is received by or accrued to any person who is not a resident … which would have constituted income had that person been a resident, there shall be included in the income of that resident so much of that amount as is attributable to that donation, settlement or other disposition.
Two further cautions. First, do not assume a multi-trust chain lets a capital gain flow through trust after trust. In the Thistle Trust case the Constitutional Court interpreted paragraph 80(2) as it has read since the 2008 amendment: a gain vested in a beneficiary trust is taxed in that trust and cannot be passed on again under the paragraph. The court did not create that limit in 2024; it explained what the statute already said. The ruling is about capital gains under paragraph 80(2). It is not a general bar on the section 25B treatment of ordinary income.
Second, plan attribution and section 7C together: the route that escapes one frequently walks straight into the other.
Frequently asked questions
Generally no, while they are minors. If your children benefit from the trust because of a donation, settlement or other disposition you made, section 7(3) deems the income to be yours and taxes it at your marginal rate — not theirs. The same loop applies to capital gains under paragraph 69 of the Eighth Schedule.
Usually not — the parent is. Where income vests in a minor child because of the parent’s donation or settlement to the trust, section 7(3) deems that income to be the parent’s and taxes it in the parent’s hands. The ordinary conduit flow-through to the child is overridden.
They are anti-avoidance rules in section 7 and paragraphs 68 to 72 of the Eighth Schedule that redirect a trust’s income or gain back to the person whose donation, settlement or other disposition produced it. For minor children, s 7(3) and para 69 tax the parent who made the relevant disposition; s 7(5) taxes the donor on income held back behind a condition — and, from 1 March 2026, only where that person is a resident at the earlier of the accrual or receipt of the income; and s 7(6) taxes a person who keeps the power to revoke or redirect a beneficiary’s income right — from 1 March 2026 only while they keep it and are a resident. Each rule has its own conditions, and being the founder of the trust is not the test.
The minor-child rules do. Section 7(3) and paragraph 69 only attribute while the child is a minor — under 18, the age of majority under the Children’s Act 38 of 2005. Other income or capital-gain attribution rules, such as s 7(5), s 7(6) and s 7(8), may still apply to the donor if their own conditions are met — for years of assessment commencing on or after 1 March 2026, s 7(5) applies only if that person is a resident at the earlier of the accrual or receipt of the income, and s 7(6) only while that person keeps the power and is a resident. Separately, section 7C may continue to create an annual deemed donation on a qualifying low-interest loan, regardless of the beneficiaries’ ages. Section 7C is a donations-tax rule; it does not itself attribute income or gains to anyone.
It deems income to have been received by the parent of a minor child or stepchild if, by reason of any donation, settlement or other disposition made by that parent, the income accrued to or was expended for the child’s benefit, or was accumulated for the child. The income is then taxed at the parent’s rate, not the child’s.