The South African Revenue Service (SARS) has provided welcome temporary relief to thousands of trustees across the country by withdrawing certain administrative penalties and final demand notices that were recently issued in respect of outstanding Trust Income Tax Returns (ITR12T).

While many trustees may view this as a reprieve, it should not be mistaken for an exemption from their compliance obligations.

In fact, SARS has made it clear that this is a temporary pause in enforcement, creating a limited opportunity for trustees to regularise their affairs before penalties are reintroduced.

What SARS Announced

In communications issued to affected trusts, SARS confirmed that previously issued final demand notices relating to outstanding trust income tax returns should be disregarded and that administrative penalties imposed as a result of those notices would be reversed where applicable.

SARS further indicated that new final demand notices will be issued in due course and that future penalties will be imposed in accordance with the applicable legislative requirements.

For trustees who have already received penalty cancellation notices, this means that penalties previously raised have effectively been removed and outstanding balances reversed.

Do Not Mistake Relief for Compliance

The cancellation of penalties does not mean that SARS has softened its position on trust compliance.

Trusts remain subject to annual income tax return filing requirements, regardless of whether the trust generated income, held assets, conducted business activities, or remained dormant during the year of assessment.

Over the past two years, SARS has significantly increased its focus on trusts, introducing enhanced beneficial ownership reporting, more detailed trust return disclosures, and stricter compliance monitoring.

The message from SARS remains clear that trusts are expected to be fully compliant.

A Small Window of Opportunity

The withdrawal of penalties presents trustees with something that is becoming increasingly rare in the tax environment—a second chance.

Trustees who currently have outstanding trust tax returns, unresolved registration issues, incomplete beneficial ownership records, or historic compliance deficiencies should use this period proactively.

Once SARS issues revised final demands, trustees may once again face recurring administrative penalties for non-submission of returns. Depending on the circumstances, these penalties can accumulate over time and become significantly more costly than addressing the compliance issues now.

The prudent approach is therefore not to wait for the next demand letter, but to use this reprieve to bring the trust's affairs fully up to date.

Trustees Have Personal Responsibilities

Many trustees remain unaware that accepting appointment as a trustee carries fiduciary duties that extend beyond simply attending meetings or signing resolutions.

Trustees are responsible for ensuring that the trust complies with its legal and tax obligations, including:

• Annual submission of Trust Income Tax Returns (ITR12T); 
• Accurate beneficial ownership reporting; 
• Maintenance of trust records and supporting documentation; 
• Compliance with the Trust Property Control Act; 
• Ensuring that tax affairs are administered correctly and timeously. 

Failure to address these responsibilities can expose trustees and trusts to unnecessary risk and cost.

The Growing Complexity of Trust Compliance

Modern trust compliance has become increasingly technical.

Trustees must navigate issues such as:

• Beneficial ownership reporting; 
• Vesting of income and capital gains; 
• Section 7C loan account implications; 
• Trust registration and deregistration requirements; 
• Tax residency considerations; 
• Capital gains tax events; 
• SARS verification and audit processes. 

For many family trusts, these matters require specialist knowledge that goes beyond ordinary tax return preparation.

Do Not Wait Until SARS Comes Knocking

The current penalty reversal provides trustees with a valuable opportunity to review their trust's compliance status before SARS resumes enforcement action.

Whether your trust has outstanding returns, unresolved SARS registration matters, historic compliance gaps, or faces uncertainty regarding its filing obligations, now is the time to act.

Trustees should consider engaging a qualified and experienced tax practitioner with specialist expertise in trusts and fiduciary taxation.

A trust compliance diagnostic can identify outstanding obligations, assess potential risks, and ensure that the trust is properly positioned before SARS reissues final demands and administrative penalties.

If you are unsure whether your trust is fully compliant, contact a trusted tax practitioner who is well equipped within the trust environment. Early intervention is almost always less costly than dealing with penalties, disputes, and SARS enforcement action after the fact.
 

Written by Sidney Fletcher, Senior Manager for Trust and Deceased Estates Tax Compliance at Tax Consulting SA