Trusts have long been a popular tool in South Africa for protecting assets, planning estates, and managing wealth across generations. They can also provide tax efficiency when used correctly. But here’s the catch: SARS has turned its focus sharply toward trust compliance, and the days of “set it and forget it” are over.
If you’re a trustee or beneficiary, understanding your compliance obligations isn’t optional…it’s essential!
What is a trust, and why are they used?
A trust is a legal arrangement in which one party (the trustee) holds and manages assets on behalf of another (the beneficiary).
Common reasons for setting up a trust include:
- Asset protection – keeping assets separate from personal or business risk.
- Succession planning – ensuring smooth transfer of wealth to the next generation.
- Tax efficiency – distributing income in a way that may reduce overall tax liability as well as estate planning.
- Philanthropy – managing funds for charitable purposes.
While trusts can offer these advantages, they also come with strict tax and reporting obligations. And SARS has made it clear: non-compliance is being closely monitored.
What does tax trust compliance involve?
Every registered trust in South Africa has ongoing obligations to remain compliant with SARS.
Here are the key requirements:
1. Registration with SARS
All trusts (whether family, business, or special-purpose) must be registered with SARS for income tax purposes. Each trust receives its own tax reference number and is treated as a separate taxpayer.
2. Filing annual tax returns (ITR12T)
Even if a trust hasn’t earned any income during the year, it is still legally required to submit an
annual ITR12T tax return.
This includes:
- Income earned (interest, dividends, rental, capital gains, etc.)
- Distributions made to beneficiaries
- Deductions and allowable expenses
- Passive trusts
3. Financial statements and record-keeping
Trustees must maintain accurate and up-to-date accounting records.
This includes:
- Asset registers
- Bank statements
- Distribution schedules
- Minutes of trustee meetings and decisions – it is very important to note that trustee decisions can not be ratified, thus trustees need to understand their obligations in this regard.
Failure to maintain these records can result in administrative penalties and, in serious cases, SARS may treat the trust as non-existent for tax purposes.
4. Disclosure of beneficiaries
SARS now requires detailed information about all beneficiaries who have received distributions. This transparency helps prevent misuse of trusts for tax evasion or money laundering.
Trustees must record:
- Names and ID numbers of beneficiaries
- Nature and value of distributions
- Dates on which distributions occurred
5. Filing of IT3(t)
Trustees need to file information about any beneficiary transactions annually, on or before 30 September of the following year.
Common mistakes trustees make
Even well-intentioned trustees often make costly errors. Some of the most common include:
- Failing to submit returns on time or at all
- Treating trust assets as personal assets (a major red flag for SARS)
- Inconsistent or undocumented distributions
- Not updating trust deeds or records as circumstances change
- Ignoring new compliance rules, such as CRS/FATCA reporting for foreign-linked trusts
These mistakes don’t just risk penalties, they can also undermine the trust’s legal standing and the very asset protection it was designed to provide.
The cost of non-compliance
The financial and reputational consequences of poor trust management can be severe:
- Penalties and interest for late or incorrect tax submissions
- Trust de-registration or loss of compliance status
- SARS audits and reclassification of assets as personal income
- Legal disputes among beneficiaries if the records are unclear
- Potential loss of limited liability protection if SARS deems the trust to be a sham
For many families, these risks far outweigh the cost of professional trust management.
The benefits of doing it right
- A well-managed, compliant trust offers peace of mind and tangible advantages:
- Asset protection remains intact – separating personal and business risk.
- Smoother estate administration – avoiding delays and disputes
- Credibility – especially when applying for finance or working with investors
- Confidence – knowing your affairs are transparent and fully compliant
How professionals add value
Tax and trust experts do far more than just file returns. They help you strategically manage your trust for long-term stability and efficiency.
At aXia Consulting, we assist clients with:
- Preparing and submitting annual trust tax returns (ITR12T)
- Maintaining accurate and compliant financial records
- Advising on tax-efficient distributions
- Ensuring alignment between trust deeds, resolutions, and accounting
- Keeping up with changing SARS legislation and reporting standards
Our goal is simple: to protect your assets, reduce your risk, and give you the confidence that your trust is 100% compliant. A trust is more than a financial vehicle. It’s a commitment to protect and manage wealth responsibly. But that protection only works when compliance is taken seriously. As SARS tightens its oversight, the cost of neglecting these obligations grows higher every year. If you’re unsure whether your trust is fully compliant (or if you’ve fallen behind), it’s not too late to fix it.
We help South African trustees stay compliant, confident, and in control. Contact us today to review your trust’s compliance status and get expert guidance that safeguards your future.
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