Tax and SARS knowledge base
What is a special trust and how is it taxed?
What is a special trust, and how is it taxed differently?
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Direct answer
A special trust is a trust meeting a specific statutory definition, commonly a trust created solely for qualifying persons with disabilities or a qualifying testamentary trust for relatives of a deceased person. It is taxed using the progressive rates applicable to individuals instead of the ordinary trust's flat 45% rate.
Special trusts do not receive the normal section 6 individual rebates. Category and eligibility also affect capital-gains treatment.
What this means in practice
Calling a trust "special" in its deed does not establish tax status. The facts, beneficiaries, disability criteria, ages, relationships and use of trust assets must meet the legal definition throughout the relevant period.
SARS may require a branch process to classify a qualifying special trust. Trustees should not simply select a favourable return category without supporting evidence.
Step-by-step
- Identify the statutory category claimed.
- Review the deed and beneficiary class against every requirement.
- Obtain current medical or relationship evidence where applicable.
- Request the correct SARS classification through the prescribed channel.
- Complete the ITR12T using the approved status.
- Reassess eligibility annually as circumstances change.
Documents and records to keep
- Trust deed, will and amendments.
- Beneficiary identity and relationship records.
- Medical evidence for a disability trust.
- SARS classification correspondence.
- Annual accounts, resolutions and returns.
Important limits and exceptions
Eligibility can end when beneficiaries age, die or cease to meet the definition. The rules for a primary-residence exclusion and capital gains are detailed and should not be inferred from the income-tax rate alone.
When to get tailored advice
Obtain advice when creating the trust, changing beneficiaries, selling a residence or responding to a SARS classification query.