Kindly advise if it is necessary to pay provisional tax for a trust that is terminating and does everything vest in the beneficiary in the year that the trust terminates?
Important:
This answer is based on tax law year ending 28 February 2020.
Answer:
A trust can only be revoked, or terminated, by the Master if all the trust property was vested and distributed to the beneficiaries. You are correct that when the trustees exercise their discretion to vest the asset that, in terms of paragraph 80(1) of the Eighth Schedule to the Income Tax Act, the capital gain that arose in consequence of the vesting by the trustees of the asset (the farm) will then disregarded in the trust and will be taken into account in calculating the aggregate capital gain of each of the beneficiaries. That of course assumes that all the beneficiaries of the trust are residents of the RSA. The same will apply to normal income that accrued to the trustees – section 25B.
If the trust then doesn’t have a taxable income for the period of assessment, an nil estimate can indeed be submitted. If the beneficiaries had vested rights to the trust property and income, then no IRP6 was required, or will have to be submitted on termination. The ITR12T is required.