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, and is taxed on the rest at an effective CGT rate of just 18% (a 40% inclusion against a 45% top marginal rate). Neither shelter survives a move into a company or an ordinary trust.
25 February 2026 – No changes in percentages but changes to exclusions … Type 2027 2026 2025 2024 2023 2022 Individuals and Special Trusts 18% 18% 18% 18% 18% 18% Companies 21.6% 21.6% 21.6% 21.6% 21.6% 22.4% Other Trusts 36% 36% 36% 36% 36% 36%
Note — The 18% / 21.6% / 36% figures are effective rates (the legislated inclusion rate — 40% for individuals and special trusts, 80% for companies and other trusts — applied to the taxpayer’s marginal rate). The percentages are unchanged for the 2024–2027 years of assessment.
The following are some of the specific exclusions: R3 000 000 gain or loss on the disposal of a primary residence; … Annual exclusion of R50 000 capital gain or capital loss is granted to individuals and special trusts …
Note — The R3 000 000 primary-residence exclusion and the R50 000 annual exclusion belong to natural persons (and special trusts). An ordinary trust and a company get neither.
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 or half-as-much-again the individual rate, with no R3 million shelter on a home. The structure can claw some of that back through the conduit principle by vesting gains in beneficiaries, but only where the attribution rules do not loop the gain back to the founder — which they generally do while children are minors.
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. For a residential rental, the s 9(1)(l)(i) exemption can relieve a genuine section 42 transfer; a going-concern commercial supply between VAT vendors uses s 9(15A) plus VAT Act s 8(25) instead. Either way the conditions must be met and an affidavit filed — see transfer duty and the section 42 exemption.
- 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% from 1 June 2026). 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 at the company or trust rate, not your 18%.
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. The non-vendor (residential) route is s 9(1)(l)(i):
No duty shall be payable in respect of the acquisition of property by— … (l) any company in terms of— (i) an asset-for-share transaction as defined in section 42 of the Income Tax Act, 1962 (Act 58 of 1962); … where the public officer of that company has made a sworn affidavit or solemn declaration that such acquisition of property complies with the provisions of this paragraph;
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:
No duty shall be payable in respect of the acquisition of any property under an asset-for-share transaction as contemplated in section 42 of the Income Tax Act, 1962 (Act 58 of 1962), where— (a) the supplier and recipient of that property are deemed to be one and the same person in terms of section 8(25) of the Value-Added Tax Act, 1991; and (b) the public officer of the company … has made a sworn affidavit or solemn declaration that such acquisition of property complies with the provisions of paragraph (a).
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. That deeming is what lets s 9(15A) relieve the transfer duty.
The ongoing cost is section 7C. Fund the move with an interest-free or low-interest loan to the trust (or to a company it controls) 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:
If a trust or company incurs— (a) no interest in respect of a loan, advance or credit referred to in subsection (1), (1A) or (1B) …; 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 by the [lender] on the last day of that year of assessment …
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:
… where a person disposes of an asset to a company in terms of an asset-for-share transaction— (a) that person must be deemed to have— (i) disposed of that asset … for an amount equal to the [base cost / section 11(a) or section 22 amount] …; and (ii) acquired the equity shares in that company on the date that such person acquired that [asset] …
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 where asset protection matters. Because the trust — not you — owns the shares, the property is generally beyond the reach of your personal creditors.
- An estate you genuinely want to peg. Once the property sits under the trust, its future growth accrues to the trust, not to you, which can reduce estate duty (20% to R30 million dutiable, 25% above) on death.
- 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 is not. Estate duty runs at 20%, stepping up to 25% above R30 million:
At a rate of 20% on the dutiable amount of the estate as does not exceed R30 million; and 25% of the dutiable amount of the estate as exceeds R30 million.
Note — The 25% tier above R30 million applies to the estate of a person who died on or after 1 March 2018. A separate s 4A abatement of R3,5 million is deducted in arriving at the dutiable amount.
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).
| Tax | Applies to | Rate (2026) |
|---|---|---|
| Income tax — trust | Income retained in an ordinary trust | 45% (flat) |
| Income tax — company | Newco's rental / trading profit | 27% |
| Income tax — individual | Income vested in a resident beneficiary | Up to 45% (sliding scale) |
| CGT — trust | Gain retained in an ordinary trust (80% inclusion) | 36% effective |
| CGT — company | Gain in a company (80% inclusion) | 21.6% effective |
| CGT — individual / special trust | Gain in a person / special trust (40% inclusion) | 18% effective |
| Dividends tax | Company pays a dividend upward | 20% |
| Donations tax | Gifts / s 7C deemed donations (25% over R30m cumulative) | 20% |
| Estate duty | Dutiable estate on death (25% over R30m) | 20% |
| Securities transfer tax | Transfer of shares (e.g. Newco shares to the trust) | 0.25% |
| VAT | Standard-rated supplies (e.g. commercial property by a vendor) | 15% |
| Official rate of interest | s 7C deemed donation on low/no-interest loans (repo 7% + 1%) | 8% (from 1 Jun 2026) |
| Transfer duty | Acquiring property — sliding scale | 0% to R1.21m … 13% above R13.31m |
Last reviewed: 3 June 2026. Rates are South African and time-sensitive; 2026 Budget measures (donations-tax exemption increases, resident-spouse limitation) are subject to Parliament's legislative process. A special trust is taxed on the individual sliding scale (CGT 18%), not the flat 45% / 36% that applies to an ordinary trust. Confirm every figure against the current SARS material before acting.
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:
The rate of Dividends Tax increased from 15% to 20% for any dividend paid on or after 22 February 2017 (irrespective of declaration date), unless an exemption or reduced rate is applicable.
Note — A return of contributed tax capital (the consideration the company received for issuing its shares) is not a dividend, so it is not subject to this 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
Usually not for tax reasons alone. As a natural person you keep a R3 million primary-residence CGT exclusion and pay other gains at an 18% effective rate. A trust gets neither — its effective CGT rate is 36% — and moving an existing home in triggers transfer duty now plus an ongoing section 7C cost. Move a home in only on a written model, and usually for asset protection or succession — not tax saving.
A let property is the strongest case, because there is no primary-residence exclusion to give up and the commercial rationale is real. But a company pays CGT at 21.6% and a trust above it at 36%, versus 18% for an individual, and you still pay transfer duty or VAT on the move. Section 42 defers the income-tax hit; it does not make the move free. Model it first.
Yes. The R3 million primary-residence exclusion is available only to a natural person (and, in limited cases, a special trust). A company or an ordinary trust gets no primary-residence exclusion, so the full gain on an eventual sale is taxable — at 21.6% in a company or 36% in an ordinary trust. Losing that shelter is the biggest reason not to move a home in on tax grounds.
It depends on the facts, and the honest answer is often no for an existing home or a long-held personal investment. The structure earns its keep where the commercial case is real — a let or business property, or future acquisitions — because asset protection and pegging the estate can outweigh the higher running rate. Never move property in without a written tax-and-legal model.
When the commercial case stands on its own: a rental or business property where asset protection matters, an estate you genuinely want to peg, or a vehicle to hold future acquisitions. There the higher 36% trust / 21.6% company CGT rate and the ongoing section 7C cost are a price worth paying. It is rarely worth it just to shelter an existing home, which already enjoys the R3 million exclusion and 18% rate in your own hands.