Capital gains tax on donations and bequests

ASL_CapitalParagraph 12(5) of the Eighth Schedule to the Income Tax Act was scrapped on 1 January 2013 and replaced with a new paragraph 12(A) which, in certain circumstances, provides relief on the payment of capital gains tax when debt is written off.

These new provisions came into effect on 1 March 2013.

In terms of these changes capital gains tax is still payable when a debt of a debtor is reduced or written off, but that there are two exceptions:

  1. Where the amount owed to a deceased estate is regarded as the “property” of the estate (as described in the Estate Duty Act), and this debt is reduced to the benefit of the legatee or heir; and
  2. When the debt that is written off can be regarded as a donation for the purposes of donations tax.

The relevant amendments to the law therefore determine in essence that:

  • It is no longer required that a donation be made in cash; and
  • there will be no liability for capital gains tax if the donation represents a reduction or writing off of debt for the receiving party.

The latter provision is especially to be welcomed considering the problems that have occurred in the past with the wording of wills in cases where heirs or a family trust owe a loan debt to a testator. It is now again possible to merely bequeath a loan account between a legator and a trust as a legacy to the trust, which amounts essentially to the reduction of a debt obligation of the trust.

In view of these recent changes to the Income Tax Act we once again encourage clients to make a donation in order to ensure a saving in estate duty in the longer term.

To make the most of the benefits of a donation the following should be borne in mind:

  • The donation should not exceed R100 000 otherwise donations tax of 20% is levied on the amount by which the tax-free limit (R100 000) is exceeded;
  • A book entry can simply be made in the place of a cash donation; and
  • The donation must be supported by a written deed of donation and, where a trust is the beneficiary, also a resolution of the trustees indicating acceptance of the donation.

Untitled-2For further information in this regard or for assistance with making a donation, please get in touch with Sonja Viljoen (sonjav@asl.co.za) at our office.

1 Response to “Capital gains tax on donations and bequests”


  1. 1 Shona 2013/04/30 at 8:32 pm

    It has a high content of lauric and myristic acids which have a melting point relatively close to the human body temperature.

    Because the under eye area is one of the
    first places to start showing signs of aging, the moisturising action of
    this oil is especially beneficial here. Almond oil is another
    example of a natural substance that has been
    in use for thousands of years.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s




Follow ASL on Twitter

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 9 other followers


%d bloggers like this: