Trulogic Financial Services & BBR van der Grijp and Associates

Our aim with the alliance between Trulogic Financial Services and BBR van der Grijp and Associates, and our monthly newsletter is to keep clients abreast of legislative and product enhancements which ultimately impacts on the management and protection of their financial security and interests.

This month BBR van der Grijp and Associates takes a look at the recent developments regarding taxation and Trusts.


The David Tax Report

As you may be aware, a committee known as The Davis Tax Committee (DTC) has been appointed with the task to review and assess the SA tax policies and framework. Led by Judge Dennis Davis, a team of experts and advisors from National Treasury, the South African Revenue Service and other related fields prepare reports on areas of taxation that need to be reviewed.

The DTC, in its second interim report on Estate Duty released late last year, identified that restrictive measures should be applied to interest free loans to trusts, thus making it a less viable option for those intending to avoid estate duty and other applicable taxes. These recommendations have now been incorporated in the Draft Taxation Laws Amendment Bill.

The Implications

The DTC proposed that the transfer of assets to a trust take place as follows, each way bringing about different tax consequences for the Seller:

First, a person may donate assets to a trust, and in doing so becomes liable for donations tax that is taxable at 20% of the market value of the asset donated (section 54 read with section 64 of the Income Tax Act, no 58 of 1962 (the ITA)).

Second, a person may sell the assets to a trust at market value. In this instance the seller will be liable for capital gains tax, in terms of paragraph 3(a) of the Eighth Schedule to the ITA.

Third, a person may sell the assets to a trust on loan account at a market interest rate. In this instance the seller will be taxed on the interest income received from the trust, in terms of section 24J(2) of the ITA. The Seller will also be liable for capital gains tax on the growth of the value of the asset as set out above.

The key concern of National Treasury (Treasury) and the South African Revenue Service (SARS) is the current penchant for selling assets to a trust on loan account at an interest rate that is lower than market rate or at zero rate, to avoid estate duty and donations tax. The asset is transferred out of the individual’s estate, and thus does not form part of the estate duty calculation. The amount of the purchase price is then reduced annually by the Seller donating the annual threshold amount back to the Trust.


Smith Tabata Buchanan Boyes have reported that the effects of the proposed legislative amendments are as follows:

1. Where interest on loans are charged at less than the official rate (8% p/a), the interest not charged, or short charged, will be included as income and taxed in the hands of the Lender with no interest exemption applicable. No deduction will be available to the Trust as it did not pay any interest.

2. Should the Lender not recover the aforementioned tax paid from the trust within a specific period, the Lender will also be liable for donations tax on this amount.

If the tone of the recent DTC report is any indication, we can expect to see many more legislative changes in the near future with the object to curb tax avoidance and control tax compliance more effectively.

Please feel free to get in touch with us to discuss this further by clicking on our logo below.



Johan Olivier from Trulogic surprises you in this article on how to keep your business healthy.


Employee benefits, healthy business!

A business is only as good as its employees. Richard Branson, Anton Rupert and Bill Gates are renowned for their ability to keep employees happy and productive. In this era of relationship marketing and interpersonal leadership, it is crucial that employees are taken care of.

Employee benefits is a type of insurance product that is sold to a company. What distinguishes it from conventional individual insurance is that the risks are pooled, meaning that it is cost efficient.

How it works

An employee benefit scheme is very similar to an individual personal life policy. The employer pays a monthly premium in exchange for the assurance that his employees, and therefore his business, are secure.  Benefits that can be provided include:

  • Funeral cover for the members’ immediate families
  • Various death benefits for the members’ families
  • An income stream while a member is disabled to such an extent that he or she cannot work
  • Retirement annuities and other retirement planning benefits
  • Investments
  • Medical Aid

An employee becomes a member of the scheme upon employment and leaves the scheme either at death, retrenchment, resignation or retirement.

Retirement Planning

Help your employees secure their retirement by investing in a retirement annuity fund. A portion of each employee’s salary is allocated towards a diversified investment portfolio. Contributions are made until retirement if the employee stays employed.

The fund value becomes available at retirement. A portion of this value can be taken as a lump sum and the remainder is used to purchase an annuity. The annuity will provide a monthly income after retirement.

South Africa’s monetary policies incentivizes retirement planning through tax exemptions and rebates. For example, contributions are tax exempt to a certain extent. Employees consequently pay less tax on their income.

Advantages for the Employer – efficient wages and salary expectations

The employer can finance salary increases from company turnover, which could hinder the company’s growth.

Alternatively, the employer can finance salary increases through prudent investments. Instead of financing salary increases on an annual basis the employer can empower his employees to finance their own increases through the appropriate employee benefit . This will mitigate, if not eliminate, the effects of inflation on a company.

Conclusion: Financial Wellness

It all boils down to managing money well. Matching liabilities to assets in an innovative way is the key to financial success. Employee benefit schemes simplify this process at a relatively affordable cost.

You will be surprised at how affordable group schemes can be.

Did you find this article interesting? Give us a call on 021 852 6740 or E mail us at to see how we can enhance your structure.

- Johan Olivier, your friendly neighbourhood actuary.

PS: If you are uncertain whether you are a large enough company or have any queries give us a shout anyway, a quotation is free.

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