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February ends with the spotlight firmly on taxation - present and future.

The much-anticipated Budget Speech will be delivered by the Minister of Finance, Pravin Gordhan, on 27 February and the tax year ends the following day, 28 February.

Before the end of the tax year, it is important to gather any outstanding documentation and have any meetings that might help you manage your tax planning ahead of that date.


The budget speech

The Budget Speech is taking place very late this year; in the past it has been delivered around the middle of February. It makes one wonder if this is in any way significant, as changes announced in the Budget Speech often come into effect on 1 March – in this case, less than 48 hours later.

Last-minute Budget: The Minister of Finance, Pravin Gordhan, has delayed his speech until 27 February.

Of course, speculation about the content of the speech is rife. Once again, a super tax on the wealthy is being mooted, as it was last year, on the assumption that such a tax would be regarded as going some way to addressing poverty and inequality in South Africa, in line with the Minister of Finance’s programme of economic change.

In an election year and given the disparities highlighted by the recent census, some sort of increase in taxation of the wealthy seems inevitable. This might take the form of an increase in the inclusion rate for capital gains tax; alternatively, an increase in the marginal tax rate applicable to the highest income earners might be on the cards.

Certain retirement tax reforms have been talked about, although mostly for implementation in 2014. The window period for taking residential properties out of South African trusts and companies without tax liability (if certain requirements were met), has just come to an end.

Other issues likely to be on the agenda in the Budget Speech include mining taxes, how a national health insurance system might be funded, the implementation of toll roads and social security taxes.


South African trusts

The trustees of existing discretionary South African trusts who are empowered in the trust deeds to distribute taxable income and capital gains to trust beneficiaries should make such decisions before the end of the tax year for the gains and income to be taxable in the hands of the beneficiaries. Distributing them in the same year as they arose in the trust could mean lower effective tax rates being applicable.

Likewise, in the event of trust beneficiaries needing funds for expenses, the trustees should decide whether the distributions should be made from income, capital gains or capital, and should sign the appropriate resolutions before the end of the tax year. Such resolutions may not be signed afterwards and backdated to 28 February. Although exact amounts will not be available until a later stage, the decision can be made to distribute the funds to a particular trust beneficiary because of income needs, or to distribute certain percentages of the funds to different trust beneficiaries.

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