Should You Move Your Property Into a Trust-and-Company Structure? [2026]

The decision point

Before reaching for a section 42 roll-over, ask the prior question: should you move this particular property into a trust-and-company structure at all? Moving an existing, personally owned property in is not automatically worthwhile — and for a home it often is not. The SARS source puts the trade-off starkly.

What you give up as an individual

The thing most people underestimate is how good the personal position already is. A natural person selling a primary residence disregards the first R3 million of gain (the figure SARS publishes for 2026/27, from clause 16 of the 2026 Draft Rates Bill; promulgated amendment not located — the enacted figure is R2 million), and is taxed on the rest at an effective CGT rate of at most 18% (a 40% inclusion against a 45% top marginal rate; lower for anyone below the top bracket). Neither shelter survives a move into a company or an ordinary trust.

So an ordinary trust pays CGT at an effective 36% (an 80% inclusion against the flat 45% trust rate) and a company at 21.6% (80% inclusion against 27%) — twice and 1.2 times the individual rate respectively, with no primary-residence shelter on a home. Keep the taxpayers straight: in the classic structure it is Newco that sells the property, so the company’s 21.6% applies to that gain, and getting the after-tax gain up to the trust costs a further 20% dividends tax (about 37.28% in total); the trust’s 36% is what the trust pays on an asset it sells itself. A dividend from Newco is not a capital gain the trust can pass through under paragraph 80. The conduit principle can claw some tax back where the trust realises a gain and vests it in beneficiaries, but only where the attribution rules do not loop the gain back to the person who made the donation or other disposition — which, for a parent, they commonly do while the children are minors. And the 18% individual rate is a maximum effective rate, not a flat rate on every gain.

The cost of moving an existing property in

The running-rate penalty is only half the picture. Moving an existing property into the structure also costs money now, on top of whatever income-tax exposure section 42 defers.

• Transfer duty (or VAT) now. Acquiring the property is a dutiable acquisition. Where transfer duty is the tax in point (the usual residential case), the s 9(1)(l)(i) corporate-acquisition exemption can relieve a genuine section 42 transfer; where the supply is between VAT vendors deemed one person under VAT Act s 8(25) (a going concern, or fixed property with a written leaseback) the route is s 9(15A) instead. Either way the conditions must be met and an affidavit filed — see transfer duty and the section 42 exemption.
• CGT and transfer duty when the shares move to the trust. Section 42 puts the Newco shares in your hands at the old base cost. Selling or donating them to the trust is a disposal at market value, so the deferred gain is taxed in your own hands (on the Nkosi numbers a R4 million gain — about R711 000 of CGT at the top marginal rate after the SARS-published R50 000 annual exclusion, or R712 800 with the enacted R40 000), and the trust’s acquisition of shares in a residential property company attracts transfer duty on the property’s value (about R437 356 on the scale in force from 1 April 2025 — see SARS’s transfer duty rate table and the Rates and Monetary Amounts Act 3 of 2026), with STT exempt under s 8(1)(n) of the STT Act. Treating the Newco shares as worth the same R6 million as the property is an illustrative valuation assumption: a share’s market value is not automatically the gross property value, because debt, other assets and liabilities, the rights attaching to the shares and the valuation evidence all count. That is separate from the Transfer Duty Act’s own valuation rules for shares in a residential property company.
• An ongoing section 7C cost. If you fund the move with an interest-free or low-interest loan to the trust, the forgone interest is a deemed donation every year at the official rate of interest (8.25% from 1 October 2026; 8% from 1 June to 30 September 2026; 7.75% before that — the figure follows the rate for each period, so “loan × 8.25%” is only a full-year illustration). That is a recurring drip for as long as the loan is outstanding — see section 7C loans.
• What deferral does and does not buy. Section 42 means no immediate capital gains tax on the move, but the company inherits your base cost, so the built-in gain is still there — taxed later in Newco at 21.6% (plus dividends tax on extraction), and it also comes out in your own hands when you move the shares to the trust.

The transfer-duty relief is not automatic — it is a specific exemption that applies only to a genuine section 42 acquisition, and only once the company’s public officer has sworn that the conditions are met. Where transfer duty (not VAT) is the tax in point — the usual residential case — the route is s 9(1)(l)(i), which contains no vendor test of its own:

Where instead both parties are VAT vendors and the property is sold as a going concern, the relieving route is s 9(15A) of the Transfer Duty Act, which leans on s 8(25) of the VAT Act to treat the two vendors as one and the same person:

Section 8(25) of the VAT Act underpins that route. Where a vendor supplies goods or services to another vendor under a qualifying section 42 (or section 44, 45 or 47) transaction, the two vendors are treated as one and the same person for that supply — but, for a section 42 or section 45 supply, only where it is the disposal of an enterprise (or a part capable of separate operation) as a going concern agreed in writing, or fixed property supplied under a written sale-and-leaseback. That deeming is what lets s 9(15A) relieve the transfer duty; s 9(15A) is specific to a section 42 acquisition meeting s 8(25), not a general exemption for every corporate transaction.

The ongoing cost is section 7C. Fund the move with an interest-free or low-interest loan to the trust (or to a company in which the trust holds 20% or more) and each year the interest you gave up is treated as a fresh donation to the trust on the last day of that year — a recurring charge for as long as the loan stands:

The income-tax deferral itself comes from s 42(2)(a) of the Income Tax Act. It does not erase the gain; it deems you to dispose of the asset at base cost — so no gain arises now — and rolls that same base cost into the company, where it re-emerges on a later sale:

When the structure is worth it

The structure earns its keep when the commercial case stands on its own, independent of any income-tax saving. Three fact patterns usually justify it:

• A let or business property you have good reason to keep apart from your personal assets. A properly established and administered trust can separate trust property from your personal property and can support succession planning. It does not create automatic protection from all creditor claims: the validity of the transfers, any guarantees you have signed, any powers you keep, and how the trust is actually run all matter. The trustees must exercise their powers properly under the deed and the law, rather than treating trust property as your own — and appointing an independent trustee is not, by itself, a cure for defective administration.
• Future growth you genuinely want outside your estate. Once the shares sit in the trust, future growth in their value accrues to the trust, not to you, which can reduce estate duty (20% to R30 million dutiable, 25% above) on death. It does not freeze your whole estate: any loan the trust owes you remains your asset, and any vested entitlement or relevant retained power must be considered separately.
• A vehicle for future acquisitions. If you intend to build a portfolio, acquiring new properties directly into the structure avoids the entry taxes you would otherwise pay to move them in later — and there is no R3 million exclusion being sacrificed.

The estate-duty point is the one that most often makes the structure pay for itself. Property you own personally is valued in your dutiable estate at death; growth that has accrued to the trust instead generally is not — but a loan claim you still hold against the trust is. Estate duty runs at 20%, stepping up to 25% above R30 million:

The rates that drive the decision

The whole decision turns on a handful of rates. Note the corrected figures: an ordinary trust’s effective CGT rate is 36% (not 18% — 18% is the top individual rate), and a company is 21.6%. A special trust sits on the individual sliding scale (18% CGT ceiling).

The illustrations on this page assume an ordinary South African company or ordinary trust, capital rather than revenue treatment where stated, the specified marginal rates, no relevant exemption or treaty reduction, and no available losses or other adjustments. Individual CGT is shown at the maximum effective rate (up to 18%). A company’s 27% applies to its taxable rental profit, not gross rent, and the combined 37.28% is measured on a capital gain before the 80% inclusion, with the whole after-tax gain then paid up as a fully taxable dividend — it is not the tax on the whole sale price. The Nkosi numbers treat the Newco shares as worth the same as the property, which is an illustrative valuation assumption. The figures are those SARS publishes for the 2026/27 tax year, checked on 29 September 2026. The R3 million primary-residence exclusion and the R50 000 annual exclusion are SARS-published, from clauses 16 and 15 of the 2026 Draft Rates Bill; promulgated amendment not located (the enacted figures are R2 million and R40 000), so their legislative status and commencement must be confirmed before the transaction is implemented. The transfer-duty scale is the one in force from 1 April 2025 (Rates and Monetary Amounts Act 3 of 2026); SARS’s Transfer Duty Guide (Issue 6, July 2023) predates it. Actual tax depends on the taxpayer and the transaction.

One rate is easy to forget: getting cash back out of the structure is itself taxed. When the company pays a dividend up to its shareholder (the trust, or you), dividends tax of 20% is withheld — a second layer on top of the company’s own 27% income tax:

Run your own numbers against these before committing. If the deferred CGT, the annual section 7C cost, the transfer duty or VAT, and the dividends tax on getting cash out together outweigh the estate-duty and asset-protection benefit, the property is better left in your own name. For the buy decision on a new acquisition, compare the routes in buying through a trust or company, and on the company layer specifically see companies holding property and the current 2026 tax rates.

Frequently asked questions