Efforts to improve trust tax compliance appear to be paying off. More than 130 000 trust tax returns have already been filed for the 2025 tax year – a sharp rise from the 84 000 submitted in 2024 and the 69 000 the year before. A further 80 000 outstanding returns for prior years have also been lodged.
Yet, overall compliance remains low. South Africa has an estimated 450 000 active inter vivos trusts (excluding testamentary trusts) registered with the Master of the High Court.
According to Phia van der Spuy, the founder of Trusteeze, comparing this figure with the number of returns submitted – which includes testamentary trusts – makes the extent of non‑compliance unmistakable.
One of the efforts to improve tax compliance is the introduction of administrative penalties for non-compliance with filing obligations. The South African Revenue Service has been threatening to introduce penalties since 2024.
Van der Spuy says trusts are the last type of taxpayer to be penalised for non-compliance. Individuals are penalised from 2008 and companies from 2018.
SARS published a draft notice for public comment on 3 December 2025 on the issuance of administrative penalties on non-compliance. In early February this year, it started issuing penalty letters but only gazetted the public notice on 27 March 2026, drawing criticism from recognised controlling bodies who represent tax practitioners.
In April, SARS published a stakeholder communiqué, and on 4 May – five months after the initial warning – the first administrative penalties were imposed.
In the spotlight
Stacy Wallace, the managing director of Hobbs Sinclair Legacy, said in a statement the spotlight now falls squarely on trusts that have outstanding tax returns, unresolved tax obligations, or incomplete deregistration processes.
“This development comes against the backdrop of South Africa’s extensive trust sector, where many trusts established for estate planning, asset protection, or family succession purposes remain registered long after their original objectives have been met,” she said.
In some cases, trusts cease operating altogether but continue to exist on official records, creating compliance risks for trustees who assume no further action is required.
A trust offers several benefits, but it also comes with challenges. Standard Bank notes on its website that one of the benefits is the provision of privacy. Unlike a will, the details of a trust remain private. This prevents public scrutiny of a taxpayer’s financial affairs after death, protecting their family from unwanted attention.
And although a trust should not be created solely for tax purposes, it can help to minimise estate duty. Transferring assets with growth potential to a trust early on can reduce the taxable value of the taxpayer’s estate later.
But there are challenges. One is the loss of control when assets are placed into a trust and others manage them. The taxpayer can at least choose the trustees who will manage the assets on their behalf.
Nonetheless the setting up and maintenance of a come at a cost, which include legal fees, trustee fees, and tax preparation fees.
Outstanding returns and deregistration
Van der Spuy advises trustees with trusts that have outstanding tax returns to start submitting the returns for 2024 and 2025. She admits that it may be difficult.
“Trust tax calculations are typically cumulative, with historical transactions potentially affecting current-year taxes. SARS will soon apply penalties to all tax years, so the sooner trustees submit all outstanding tax returns, the better,” she notes.
This also applies to so-called dormant trusts. There are no exceptions. If a trust serves no purpose, it should be deregistered. If a trust protects assets and is implemented as an estate planning tool, it should remain compliant with SARS.
Previously, it was not necessary to deregister a trust because SARS did not enforce the legal requirement for trusts to submit tax returns. Now it is necessary to deregister if the trust is not going to be used.
Wallace agrees and states that SARS has made it clear that trusts that no longer serve a purpose must still follow a formal process before they can be removed from the tax system. This includes submitting all outstanding tax returns, settling any tax liabilities, and providing supporting documentation confirming the termination of the trust.
Proper tax administration
A problem facing many trustees is the lack of proper trust administration and paperwork, which is critical for trusts. Paperwork such as resolutions and minutes of meetings must be submitted with the trust’s tax returns from the 2023 tax year.
Wallace warns that the longer a trust remains unattended, the more complicated and costly it becomes to rectify the position. She recommends that trustees conduct a review of all trusts under their administration to determine whether they remain active, confirm that all tax returns have been submitted, and ensure that SARS’s records accurately reflect each trust’s status.
“Once penalties begin accumulating, the cost of inaction can quickly outweigh the cost of resolving the issue properly,” she noted.
Amanda Visser is a freelance journalist who specialises in tax and has written about trade law, competition law, and regulatory issues.
Disclaimer: The views expressed in this article are those of the writer and are not necessarily shared by Moonstone Information Refinery or its sister companies. The information in this article is a general guide and should not be used as a substitute for professional tax advice.
