Navigating Trust Penalties and Deregistration: What Trustees Need to Know

The South African Revenue Service (SARS) has announced important updates regarding trust tax compliance and deregistration. These changes affect trustees, tax practitioners, and beneficiaries, and require careful attention.

📌 Deferral of Trust Penalties

Administrative penalties for late or non-submission of trust income tax returns (ITR12T) have been deferred to 4 May 2026. Originally scheduled for 27 March 2026, this extension acknowledges the complexity of trust compliance.

• Trustees now have extra time to regularise outstanding tax affairs.
• After 4 May 2026, penalties will apply if a trust fails to comply within 21 business days of a final demand.
• SARS has made it clear: this is a grace period, not a reprieve.

⚖️ Deregistration of Trusts

For trusts that no longer exist but remain registered, SARS requires a formal deregistration process:

1. Termination at the Master’s Office
   • Submit the original Letter of Authority, final bank statements showing a nil balance, and proof of beneficiary distributions.
   • The Master will issue written confirmation of termination.
2. Tax Deregistration with SARS
   • Only after Master’s confirmation can trustees proceed with SARS deregistration.
   • Required documents include trustee resolutions, Letter of Authority, final bank statements, proof of distributions, and latest Annual Financial Statements.
   • All outstanding tax returns and liabilities must be settled before deregistration is processed.

🚨 Key Risks for Trustees

• Personal Liability: Trustees act as representative taxpayers and may be held personally liable for non-compliance.
• Refunds: If a trust is terminated before SARS processes refunds, those funds cannot legally be paid out.
• Delays: Incorrect sequencing (approaching the Master before regularising tax affairs) can cause significant administrative delays.

✅ Practical Guidance

• Submit all outstanding trust tax returns before 4 May 2026.
• If a trust is dormant or dissolved, initiate deregistration promptly and in the correct order.
• Maintain meticulous records—bank statements, resolutions, and proof of distributions are essential.
• Engage SARS early through eBooking or prescribed email channels to streamline the process.

Final Thoughts

The deferral of trust penalties offers trustees a valuable opportunity to bring their affairs up to date. Proper deregistration safeguards compliance, protects trustees from liability, and ensures beneficiaries receive their entitlements without unnecessary complications.