4. 4 Confidential | Investec Investment Management Services
Davis Tax Committee – Interim Report on Estate Duty
Trusts
41% tax
rate to be
maintained
(effective
CGT rate
27.3%)
Resident
trusts:
sections 7
& 25B
deeming
provisions
to be
repealed
Special
trusts:
retain
status
Non-
resident
trusts: all
distributions
taxed as
income
5. 5 Confidential | Investec Investment Management Services
Davis Tax Committee – Interim Report on Estate Duty
• Trusts taxed at highest rate
• Assets distributed – CGT
• Taxes on transfer of assets
to trust
• Use of interest free loans
Trusts:
Report ignores
6. 6 Confidential | Investec Investment Management Services
Davis Tax Committee – Interim Report on Estate Duty
Trusts valuable:
• Trusts protect assets from:
• Financially unsophisticated spouses / children
• Minors
• Elderly
• Creditors
• Other persons with poor financial skills
• Agricultural land
• Charitable purpose
7. 7 Confidential | Investec Investment Management Services
Davis Tax Committee – Interim Report on Estate Duty
• Estate Duty to be retained
at current rate of 20%Estate Duty
8. 8 Confidential | Investec Investment Management Services
Davis Tax Committee – Interim Report on Estate Duty
• Exemptions / roll-overs to be
withdrawn or limited – section
4(q) deductions
Inter-spouse
Bequest
• Inter-spouse exemption to be
retained BUT interests in fixed
property or companies
excluded
Donations
Tax
9. 9 Confidential | Investec Investment Management Services
Davis Tax Committee – Interim Report on Estate Duty
• Primary abatement to be
increased to R6m per taxpayer
• Total max abatement for first-
dying spouse R12m (reverse roll-
over)
Abatements
• Disallowed contributions
remaining at death – ED
• Reflected in TLAB 2015
Retirement
funds & ED
10. 10 Confidential | Investec Investment Management Services
Taxation Laws Amendment Bill 2015
Deduction of contributions to ALL retirement
funds
27.5% of greater of remuneration / taxable
income, capped at R350,000
Roll over relief
Further tax relief at
retirement, after
retirement, at death
Employer
contributions –
fringe benefit
Effective
1 March 2016
Summary:
• Contributions of all retirement funds added together, including
employer contributions
• Percentage and monetary caps
• Roll over – even at and after retirement
11. 11 Confidential | Investec Investment Management Services
Taxation Laws Amendment Bill 2015
Provident fund annuity alignment
Option 1
Exception 1:
Vested rights protected (plus growth)
Exception 2:
Investors 55 & older
Exception 3:
De minimus
R247 500 ?
Annuitisation required –
max 1/3 at retirement
Effective
1 March 2016
Summary:
• All retirement funds treated the same: max 1/3 at retirement
• For provident funds: certain exceptions
• Vested rights
• Investors 55 and older on implementation
• De Minimus
12. 12 Confidential | Investec Investment Management Services
Taxation Laws Amendment Bill 2015
Provident fund annuity alignment
Option 2
Phased in approach
2A:
• 2016/17
• No annuitisation,
• deduction 27.5% / R350 000
• 2017/18
• Required to annuitise,
• full vested rights for over 55
2B
• 2016/17
• No annuitisation,
• tax deduction 27.5% / R350
000
• 2017/18
• No annuitisation,
• tax deduction of 10% / R125
000
• 2018/19
• Required to annuitise,
• full vested rights for over 55
2C
• 2016/17
• No annuitisation,
• tax deduction 27.5% / R350
000
• 2017/18
• No annuitisation,
• tax deduction of 10% / R125
000
• 2018/19
• No annuitisation,
• tax deduction of 10% / R125
000
:
13. 16 Confidential | Investec Investment Management Services
Taxation Laws Amendment Bill 2015
Disallowed contributions subject to estate duty
Proposal: Amount equal to disallowed
contributions remaining at death…
Applicable to persons who
pass away on/after 1
January2016
ASISA comment: should
apply to contributions made
on/after 1 March 2015
…to be included in
estate for ED
purposes
Davis Tax Committee
Report also suggests only
applicable to contributions
made on/after 1 March 2015
Summary:
• Disallowed contributions left over at death – ED payable
• Applicable to investors who pass away on/after 1 January 2016
• ASISA & Davis Tax Committee – should only apply to contributions
made on/after 1 March 2015
14. 18 Confidential | Investec Investment Management Services
TLAB 2015 – impact on RA’s
Provision for retirement
Income tax saving on
contributions, lump sum or
annuity (if disallowed
contributions)
No income tax, CGT or DWT in
the fund – maximum growth
Protection against creditors
No ED (excluding disallowed
contributions) or executor fees
(investment paid to dependent /
nominated beneficiary)
Start saving early
for maximum
benefit!
15. 19 Confidential | Investec Investment Management Services
Draft Default Regulations
Draft regulations published under the Pension Funds Act – retirement
funds to provide members with:
Default
Preservation
Investment
portfolios
Annuity
strategies
16. 20 Confidential | Investec Investment Management Services
Draft Default Regulations
Default investment portfolios
• All funds must have default portfolio, unless exempted
• Members must inform fund in writing if he/she wishes to invest in another portfolio
• Portfolio must be appropriate for members
• Fees & charges regularly disclosed
• Boards to consider passive investments as part or all of portfolios
• Performance fees & loyalty bonuses not permitted
• Regulation 28
• Default portfolio to be reviewed regularly
17. 21 Confidential | Investec Investment Management Services
Draft Default Regulations
Default preservation rules
• On termination of employment, become “paid-up member” of fund
• Receive paid-up membership certificate within 1 month of leaving employer
• New employer’s fund must request paid-up certificate & automatically transfer
benefits to new fund
• May still select a full withdrawal or transfer to another fund of member’s choice
• Roll of retirement benefit counsellor
18. 22 Confidential | Investec Investment Management Services
Draft Default Regulations
Default annuity strategies
• Various products can form part of default annuity strategy
• In fund guaranteed annuity
• In fund living annuity
• In fund with profits annuity
• Out of fund guaranteed annuity
• Member may still elect to transfer to annuity of choice
• Default annuities subject to Reg 28
• Meet with retirement benefit counsellor 3 months before retirement – discuss
options
• Living annuities - age related draw-down rates
20. 24 Confidential | Investec Investment Management Services
Disclaimer
All information and opinions provided are of a general nature and are not intended to address the
circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as
an adviser or in a fiduciary capacity. No one should act upon such information or opinion without appropriate
professional advice after a thorough examination of a particular situation. We endeavour to provide accurate
and timely information but we make no representation or warranty, express or implied, with respect to the
correctness, accuracy or completeness of the information and opinions. We do not undertake to update,
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subsequently becomes inaccurate. Any representation or opinion is provided for information purposes only.
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