My client is married by Ante nuptial contract, salaried and falls into the 41% tax bracket. He has bank deposit investments of about R5,000,000 yielding interest income. Can he transfer the R5,000,000 into his wife's name so that she can earns the interes
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
Because the intention is “to lower his tax liability by shifting the interest income”, we submit that “the sole or main purpose of such donation, settlement or other disposition or of such transaction, operation or scheme was the reduction, postponement or avoidance of the donor’s liability for any tax” – see section 7(2) of the Income Tax Act. The consequence of that is that “any income received by or accrued to any person married in or out of community of property (… referred to as the recipient) shall be deemed for the purposes of this Act to be income accrued to such person’s spouse (…referred to as the donor)” – see section 7(2) of the Income Tax Act.
The fact that donations are “permissible in view of unlimited donations between spouses” is a donations tax issue – section 7(2) is an anti-avoidance measure.