In terms of Section 56(2)(b) of the Income Tax Act, any natural person may donate property up to R100,000 annually without attracting donations tax.
Here’s how you can make this work for you:
- Donate to your trust: Utilise your R100,000 exemption to transfer funds to your trust without triggering tax.
- Let your trust invest: The trust can use this donation to invest in tax-efficient products like endowments, which are taxed at a maximum effective rate of 30% (compared to the 45% marginal rate trusts typically pay).
- Grow wealth smarter: This strategy allows you to shift assets into a more favourable tax environment and build intergenerational wealth over time.
Other tax-exempt donations include:
- Donations to your spouse are exempt from donations tax.
- Donations to an approved public benefit organisation (PBO) are tax-deductible, up to 10% of your taxable income, if you have a valid Section 18A certificate.
- For companies and trusts: casual gifts up to R10,000 per year are exempt (Section 56(2)(a)).