By Suzanne Smit
SARS has for some time been drawing the net tighter around trusts and it is now hauling it in.
Following a Government Gazette notice published on 27 March 2026, SARS has introduced fully automated administrative penalties for trusts that have failed to submit their income tax returns. This is not a future threat as final demands have been landing in trustee inboxes since February. The penalty regime is live, and it applies to every trust registered with SARS, without exception.
What the penalties look like
The penalty is calculated on the trust’s assessed loss or taxable income and ranges from R250 to R16 000 per outstanding return, per month, for up to 36 months or up to 47 months where SARS cannot successfully communicate with the trustees. With an estimated 120 000 trusts currently non-compliant out of approximately 300 000 registered trusts, the tax gap SARS is targeting is estimated at between R50 – R60 billion. The collection machinery is fully automated.
The “dormant trust” misconception will be costly
One of the risky assumptions we encounter in practice is that a trust with no income or no assets has no tax return obligation. SARS has been unequivocal: all resident trusts must register and submit annual income tax returns, regardless of whether they are active, unfunded and / or dormant.
Equally important, and often overlooked, is that a trust’s tax compliance obligations do not end when trustees stop using it. They end only once the trust has been formally deregistered with SARS. A trust that has been wound down informally or even terminated by the Master of the High Court, remains exposed to penalties until the SARS deregistration process is completed. The deregistration process requires submitting all outstanding returns, settling all outstanding liabilities, and providing SARS with supporting documentation confirming termination. Until that is done, the penalties continue to accrue.
What you should do now
If you are a settlor, trustee and / or beneficiary of a South African trust, active or dormant, we recommend immediately conducting a compliance review. The window to act before penalties begin accumulating is narrow, and the compounding effect of 36 months of monthly penalties on multiple outstanding returns can be substantial.
If you have any concern about the status of a trust in which you are involved, please contact us without delay. Beyond tax compliance, trustees should take the following steps without delay:
- Verify and update the trust’s registered information with SARS.
- Settle any outstanding tax liabilities.
- Ensure that financial records are accurate and complete.
- Where a trust is no longer needed for its intended purpose, initiate the formal deregistration process starting with the trust’s tax compliance status, then the Master of the High Court, and finally SARS.
Please contact us should you require assistance with any of the above.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)