Read more about the article The Risky New Trust Landscape – What Trustees Need to do Now
Metaphor of business solution, support, coaching, insurance, innovation and another helping business themes. Wide banner composition with office in background.

The Risky New Trust Landscape – What Trustees Need to do Now

“The common assumption is that trusts are some kind of tax panacea…Then, conversely, from a South African Revenue Service (SARS) perspective, trusts are viewed with a degree of suspicion and mistrust. [T]he truth lies somewhere between these positions.” (Broomberg on Tax Strategy)

The legal and tax landscape in which South African trusts operate has changed substantially over the last few months, thanks to changes to the Trust Property Control Act (“Trust Act”) and the Financial Intelligence Centre Act (“FICA”) by the General Laws (Anti Money-Laundering and Combating Terrorism Financing) Amendment Act, as well as new rules and requirements from SARS.

These changes impose new duties on trustees, and apply to all trustees, not only independent trustees.

1. Disclosure to Accountable Institutions you engage with, and record-keeping

Changes to the Trust Act impose two specific new requirements on trusts to combat money laundering and crime-financed terrorism, and failure to comply is an offence. If convicted, trustees face a fine of up to R10 million, or imprisonment for a period of up to five years, or both. These requirements became effective on 1 April 2023, leaving most trustees already non-compliant.

The first new requirement is that a trustee must disclose to any “accountable institution” (see here for the full list of what comprises an accountable institution, but the definition includes banks, attorneys, estate agents, long term insurers and brokers, trust companies and the like) that he/she engages with it in his/her capacity as a trustee, and that the relevant transaction or business relationship relates to trust property. The trustee must also record the details of the accountable institution the trust is engaging with.

2. Compiling and registering beneficial ownership

The second requirement imposed by the changes to the Trust Act is to establish and record the beneficial ownership information of a trust; to keep an up-to-date record of this information; and to lodge a register of the beneficial ownership information prescribed with the Master of the High Court.

This second requirement recently doubled, as SARS issued notice that trusts will now also be required to submit beneficial ownership details when completing a trust tax return, among a number of other tax changes affecting trusts, as discussed below.

3. Filing third-party returns – the IT3(t)

A further onerous obligation was imposed by SARS:

Most trusts are now also required to file third-party returns, in the same way banks report interest income and medical aids report medical aid tax information to SARS, which it uses to, for example, pre-populate tax returns.

While trust distributions were not previously reported to SARS by third parties, the new requirements oblige trusts to file third-party returns to SARS to declare distributions and vesting amounts to beneficiaries.

This must be done via an IT3(t) report which contains prescribed information relating to trust distributions and their beneficiaries and requires trusts to report on demographic information of the trust, demographic information of trust persons/beneficiaries, trust financial flows, and any amounts vested in a beneficiary, including net income, capital gains and capital amounts.

The ITR3(t) must be submitted by 31 May of each year. The first submission will be for the 2024 year of assessment, with the first ITR3(t) due by 31 May 2024. This is the same as the due date for IT3(b) and IT3(c) returns for trusts, which report interest, dividends, and capital gains or losses to SARS, and will certainly present practical difficulties in meeting the deadlines.

4. Completing more probing trust tax returns

With the trust filing season now open, SARS has also reminded trustees that ALL trusts are required to register for income tax purposes and that the representative taxpayer – most often the trustee/s – must submit a trust return.

SARS also recently introduced changes to the Income Tax Return for Trusts (ITR12T) with additional questions, and more mandatory supporting documents.

As mentioned, SARS has added a Beneficial Ownership Declaration page to the trust return to record all beneficial owners, and has indicated this information will be reconciled with the information reported to the Master’s Office to identify any discrepancies.

The changes also include additional questions to determine if any local or foreign amount(s) were vested in the trust as a beneficiary of another trust, or deemed to have accrued; and the number of trusts from where these amounts were received.

In addition, beneficiaries and donors (where deeming provisions apply) of a trust must declare their income that was vested in a beneficiary by the trust during the year of assessment in their income tax returns.

A range of mandatory and supporting documents must be submitted with the ITR12T. Depending on the trust type, this includes the Trust Deed and Letters of Authority, details of the ‘Main’ Trustee who is the registered representative to SARS; Annual Financial Statements, confirmation of banking details, and resolutions/minutes of trustee meetings that document significant decisions and actions taken by the trustees.

5. Registering as an “accountable institution”

Due to amendments to FICA, trustees, trust accountants and trust administrators may – in certain instances – have to register as “accountable institutions” with the Financial Intelligence Centre (FIC). See the link and comments in paragraph 1 above for the full definition of “accountable institution” but, if in any doubt, be sure to confirm with your accountant whether you need to register as an “accountable institution” in terms of the new rules, and to obtain assistance in doing so where required.

Professional assistance strongly recommended

Given all these new laws and requirements, the complexity of the processes necessary to comply, the impossible deadlines – some of which have already passed – and the hefty penalties involved, if you are a trustee you should urgently seek assistance from your accountant to ensure you can successfully navigate this new trust landscape.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© CA(SA)DotNews

Comments Off on The Risky New Trust Landscape – What Trustees Need to do Now
Read more about the article Ten Often-Overlooked Ways Your Accountant Can Help Your Business
Business growth success achievement concept, planning development leadership and customer target group

Ten Often-Overlooked Ways Your Accountant Can Help Your Business

“If you talk to a top accountant about his field of expertise, it’s mind-boggling.” (Vincent Kompany, professional football manager and former player)

Accountants are the tax and compliance champions of any industry, but the best ones do so much more for their clients, as strategic advisors and trouble-shooters who can also assist with automating a variety of tasks and pave the way for the running of a smooth and profitable business. Here is a list of not-so-obvious services an accountant can assist with that will help your business thrive.

1. Setting up a new business

Setting up a new business comes with a number of potential pitfalls that may not be discovered until it’s too late. For instance, the type of business you choose to set up, be it a company, sole trader, trading trust or partnership will come with different tax requirements, paperwork and personal liabilities. Changing the kind of business vehicle at a later stage can be a costly process, so having an accountant assist you in ensuring you are starting off with the best entity for your business could make a huge difference.

2. Buying or selling a business

If you are thinking of either selling your business or buying a new one, your accountant should be your first stop. Accountants can assist with business valuations, form exit strategies, and get the right financial reports and documents together to ensure you only make good decisions. Your accountant will also help keep costs down and make sure you don’t find yourself on the wrong end of a bad deal.

3. Cash flow adjustments

One study performed by Jessie Hagen of U.S. Bank revealed that 82% of businesses fail because of poor cash flow management. There is, therefore, no doubt that not being able to meet financial obligations when you need to is certainly an indicator that things are not going well. The good news is that your accountant can help.

By conducting a thorough business analysis, your accountant may be able to rebalance your budget and debts, optimise your cash flow and build cash flow projections.  By simply showing you what needs to be paid when, organising cash reserves, and adjusting the way money is used in the business, you can avoid upsetting suppliers and staff and ensure your business operates as smoothly as possible.

4. Business operations

There are many decisions in a business that look like they may be simple, but the fact that they involve an element of finance makes them a critical task to take to your accountant. Accountants can help with analysing whether your equipment should be bought, or leased, whether offices should be rented and where, and whether the terms and conditions offered by one supplier are truly better than those of another.

Your accountant is also best suited to assist in pricing your products to make sure you are getting the most profit from each sale and maximising your potential client base. They will also be able to point to areas of under-performance in the business and suggest possible areas for expansion.

5. Cloud software

Your accountant is also able to help you automate much of your business’s monthly bookkeeping and set up an invoicing system that will tell you at a glance who has paid and who has not. This smart software can even send emails to clients to chase up unpaid invoices, all of which saves you time and keeps you on top of your finances.

6. Networking

Good accountants work with other good businesses. If you are looking for suppliers or even investors it can never hurt to chat to your accountant about what you need – you never know, perhaps they know the right person?

7. Securing financing

At some stage in every successful business’s life, there will probably come a time when additional finance is necessary. Whether it’s securing a loan that helps bridge tough times, or attracting investors for necessary expansion, getting this money will need well-structured and legible financials.

Your accountant is therefore the first person you should speak to. They can help you structure your investment pitches and loan applications in a way that investors prefer, showcasing your business and making your investment-seeking efforts more likely to succeed.

8. Stock management

It isn’t always easy to tell on a day-to-day basis if your stocks are being managed correctly. Fortunately, your books will reveal a lot to your accountant about what’s happening in your stock room. Are you ordering too much, and therefore spending too much on storage, or writing off a high percentage of obsolete or expired goods? Or is the opposite true and you are missing out on sales by not having the correct parts or products in store? Your accountant can look at the trends over time and reveal what changes need to be made to ensure you are operating at peak efficiency.

9. Long-term planning

An accountant can put long-term plans in place, which will ensure loans are paid off as efficiently as possible, staff are taken care of as well as possible within the business’s means, and that its systems and resources are set up to ensure the inevitable difficult times are as painless as possible.

10. Advice

Your accountant will no doubt be working with a number of other businesses in numerous different sectors. They may therefore be able to see the bigger picture. This together with their wealth of experience in business operations and in seeing where things have gone right and wrong in the past, makes them the ideal people to ask for advice or even get onto your board. Accountants will be able to help you make the right decisions to grow your business, pay off debt or point you in the best direction when you are struggling with a tough decision.

Ultimately, your accountant is so much more than simply your “tax guy”. By assisting you in every facet of your business your accountant can help you avoid a variety of frustrations and troubles and help you build a successful, well-oiled and streamlined business.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© CA(SA)DotNews

Comments Off on Ten Often-Overlooked Ways Your Accountant Can Help Your Business

Five Essential Bookkeeping Tips for Small Businesses

“Making good judgements when one has complete data, facts, and knowledge is not leadership – it’s bookkeeping” (Dee Hock, Founder and CEO of VISA)

When running a small business, it often feels like you are doing everything yourself, and some important tasks can slip under the radar. One aspect that should never be forgotten though is bookkeeping. While intimidating, keeping your finances in order need not be as hard as it sounds. Here are our tips for ensuring your accounts remain ordered and your peace of mind intact.

  1. Ask your accountant
    If you want to keep things as simple as possible and guarantee you never run foul of the law, getting your accountant in to do your bookkeeping is the safest and most efficient way to do your books. Apart from being able to manage your finances, an accountant would be able to help save on taxes and advise you on areas of the business that may be streamlined.
  2. Keep your personal and business accounts separate
    It may not seem like much, but mixing up which account pays for what can lead to hundreds of extra hours of work over the course of a year working out which deductions and expenses relate to your business. Rather keep personal and business accounts and banking separate.
  3. Set up reminders for important deadlines
    Using an online calendar, it’s now easy to set up reminders for all those important tax and other deadline dates so you know when things are becoming urgent.
  4. Keep receipts
    Be sure to keep all receipts to build a verifiable audit trail. Whenever you pay anything out to a supplier it’s important to get an invoice and file it away. Keep all your receipts for all business expenses and purchases. You never know when you may be hit with an audit and need to prove everything you have said.
  5. Keep reports
    Every month generate a one-page document detailing all your income and expenditure. Ask your accountant to set up a simple monthly one-page report that, in addition, compares actual income and expenses to your budget. It doesn’t have to be detailed but should give you an idea of just where the money is going and what is coming in. As well as making bookkeeping easier, it will also help you track the growth and health of your company.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© CA(SA)DotNews

Comments Off on Five Essential Bookkeeping Tips for Small Businesses

End of content

No more pages to load