Understanding Sars' crackdown on trust tax compliance

The South African Revenue Service (Sars) has reported a recent surge in trust tax return submissions, yet it says it remains concerned about the overall level of compliance within the trust sector. No wonder then that Sars is significantly increasing its scrutiny of trusts to ensure compliance with tax laws, focusing intensely on registration, accurate declarations, and timely payments.

Figures for the 2024 tax year show progress, with 84,134 current-year returns and an additional 80,132 prior-year returns lodged— a total of 164,266 submissions. However, Sars believes compliance in the trust space could improve further.

This sharper focus comes as Sars embarks on an ambitious campaign, known as Project AmaBillions, to collect an additional R70 billion over the next three years, signalling a new era of enforcement. Following the Budget Speech in May 2025, Sars said that in the current tough domestic and global economic conditions, the R1.986 trillion revenue target for the 2025/26 financial year is a challenging estimate and imposes the responsibility on Sars to implement revenue-raising initiatives.

Sars intensified focus on trust compliance

Trust tax compliance in South Africa is a multifaceted area governed by the Income Tax Act, the Trust Property Control Act, and various pronouncements and guidelines. The revenue service is leveraging technology and data analysis to identify non-compliant trusts, and trustees, notably, bear personal legal liability for their trusts' tax obligations.

A critical challenge identified by Sars is the vast number of unregistered trusts. An estimated 60% to 65% of trusts registered with the Master of the High Court have yet to register with Sars for tax purposes. This represents a substantial gap in the tax net, which Sarss is actively working to close by leveraging third-party data to identify and automatically register these entities.

Furthermore, Sars places a strong emphasis on the accuracy and thoroughness of declarations. The introduction of the IT3(t) third-party data return is pivotal in this effort, aiming to enhance transparency and ensure that income distributed by trusts is correctly accounted for in the beneficiaries' tax returns.

The requirement for trusts to submit beneficial ownership information to both the Master of the High Court and Sars is also of key importance, designed to ensure clarity regarding who ultimately benefits from trust assets and income.

Sars enhances enforcement

The tax authority is enhancing its enforcement capabilities.

• Sars is expected to start levying administrative penalties on non-compliant trusts for the non-submission of annual income tax returns and IT3(t) returns.
• Sars is making it clear that trustees bear personal legal liability for their trusts' tax obligations and will hold all trustees jointly and severally liable for non-compliance.
• In line with its ambitious collection targets, Sars is planning on hiring 1,500 recruits over the medium term to bolster its enforcement efforts.

Trustees should be proactive

To avoid penalties and ensure the smooth administration of a trust, trustees should be proactive in understanding and meeting their tax compliance obligations. Seeking professional advice from tax practitioners specialising in trusts is highly recommended. Here's a summary of the key requirements:

• Register the trust with Sars (in addition to the Master of the High Court)
• File the annual ITR12T tax return accurately and on time
• Accurately declare all income, expenses, and distributions
• Submit the beneficial ownership register to both the Master and Sars
• Submit the IT3(t) return by 30 September each year
• Ensure timely payment of any tax due
• Maintain accurate financial records

Even dormant or inactive trusts still need to comply with Sars requirements.

Why this matters

Sars is not out to punish compliant trusts, but they are making it harder to ignore obligations. If the paperwork isn’t in order or distributions are not declared properly, the consequences could be serious. Sars is determined to make it hard and costly for taxpayers who willfully fail to meet their obligations.

The bottom line

Whether you manage a trust, benefit from one, or advise trustees, the message is clear: Sars is watching, and they are ready to act. The steps are manageable if handled proactively, and it is crucial to get things in order.

With Sars ramping up enforcement capabilities and its focus on trust compliance, including the hiring of additional personnel and the levying of penalties, it is more important than ever to work with a qualified tax practitioner who understands trust compliance. This will mitigate risk and ensure adherence to all regulatory requirements.

* Fletcher is a senior manager trust and deceased estate tax compliance at Tax Consulting SA.

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