Tax and Deceased Estates
12 December 2016 - Estate Reform
System changes pertaining to Estates were introduced on 9 December 2016 in line with key legislative requirements.
The changes optimises the processing of deceased estates and lighten the administrative burden on executors of deceased estates.
The changes are mainly for:
- Deceased Estates – Sec 25(1) of the Income Tax Act no. 58 of 1962:
- A new dispensation for income received by or accrued to the executor of a deceased estate, as well as certain acquisitions or disposals of assets by the executor of the deceased estate will be introduced and come into effect in respect of persons who die on or after 1 March 2016. This will be done by creating a new income tax record for the deceased estate which will do away with anomalies which currently exist pertaining to the income received or accrued and the acquisition/disposal of assets after date of death. The deceased estate will, therefore, be subject to a second income tax registration (new income tax entity).
- Currently, for deaths prior to 1 March 2016, income other than Capital Gains Tax (CGT) accrued after date of death, is taxed in the hands of the beneficiaries. CGT however, is taxed by way of a Special Trust Type A. With the implementation of the legislative changes, all income including CGT will be taxed in the hands of the deceased estate. The deceased estates for deaths on or after 1 March 2016 will no longer be required to register for Special Trusts Type A.
- Second Income Tax Registration:
- Only deceased estates of taxpayers who passed away on or after 1 March 2016 and where the executor of the estate had received post date of death income, or there was certain acquisitions/disposals of assets by the executor after date of death will be subject to the second income tax registration.
- The executor (registered representative) requesting the second income tax reference number must be the same as the executor on record at SARS in respect of the taxpayer’s income tax reference number to date of death. The application for the second income tax reference number can be processed via eFiling or at a SARS branch. If the executor was replaced after the taxpayer records were marked as a “Deceased Estate”, a letter of appointment must be provided in order to change the representative details.
- The banking details for the “to date of death” and “post date of death” registrations must be the banking details of the deceased estate provided by the executor and must not be the banking details of the deceased taxpayer. Where the banking details used in the first registration differs from those in the second registration, the representative must provide and meet all FICA requirements to change the banking details of the deceased estate.
List of supporting documents for second registration for deceased estates:
Supporting documents are required from a bank details perspective.
In the case of deceased estate:
- A letter of authority/executorship signed and stamped by the Master of the High Court;
- Valid original or a temporary identity document/passport/driving licence of the executor and a certified copy thereof. Where the executor is not in a possession of a certified copy, make a copy and any SARS official who is an Authorised Commissioner of Oaths must certify the relevant copy;
- Original bank statement or ATM/Internet generated statement or ABSA eStamped statement not more than three months old that confirms the account holder's legal name, bank name, account number, account type and branch code, where applicable, or where a new bank account was opened and a bank statement cannot be produced, an original letter from the bank not older than one month on the bank letterhead with the original bank stamp reflecting the date the bank account was opened and confirming executor’s or estate late bank account details; and
- Copy of a proof of residential address of the executor.
- Over and above mentioned list, a copy of a death certificate of the deceased.
Please note: The second registration will not be automatically registered when the taxpayer record is marked as a “Deceased Estate”.
For more information call the SARS Contact Centre on 0800 00 7277 or visit your nearest SARS branch.
What is it?
The passing away of a loved one is always difficult but we thought some practical advice might be useful.
- The death must be reported to the nearest office of the Master of the High Court or Magistrate’s court in order to obtain the Letter of Executorship or Letter of Authority.
- Once in possession of the death certificate and the Letter of Executorship or Letter of Authority, the death must be reported to the nearest SARS branch. Thereafter SARS will take the necessary steps to engage with the executor and request the required information.
- You need also to amend your tax return if you were married to reflect the change in your marital status.
- Please bear in mind that Estate Duty is levied on certain deceased estates. To read more about this please visit our section on Estate Duty.
Top Tip: Have you been asked to submit an ITR12 for the 2016 tax year? Find out more about Tax Season 2016.