New SARS Trust Reporting Requirements: What Trustees and Beneficiaries Need to Know

SARS continues to increase its focus on trust transparency and reporting compliance. Trustees are now required to provide significantly more detailed information relating to beneficiaries, loan accounts, and trust distributions. New reporting requirements, including the introduction of the IT3(t) return, allow SARS to more easily cross-check information between trusts and individual taxpayers.

Trustees should ensure that all trust records, disclosures, and beneficiary information are accurate, complete, and properly reported to avoid unnecessary verification requests, audits, or penalties.

What Is an IT3(t) Return?

The IT3(t) is a new third-party reporting return for trusts that must be submitted to SARS in addition to the trust’s annual income tax return (ITR12T). It is designed to give SARS greater visibility over beneficiary distributions, vesting, and trust transactions

An IT3(t) return:

• Reflects distributions made or amounts vested by a trust to beneficiaries

• Is submitted to SARS on behalf of the trust

• Includes beneficiary and transaction information used by SARS for tax reporting purposes

• May pre-populate certain information onto beneficiaries’ personal tax returns

In simple terms, the IT3(t) acts as a cross-checking mechanism between the trust and the individual taxpayer. Where information disclosed by the trust does not align with a beneficiary’s tax return, SARS may more easily identify discrepancies and request further information, verification, or review.

Increased Disclosure Requirements for Beneficiaries and Loan Accounts on the Trust income tax return

Where distributions are made to beneficiaries, or where beneficiaries and Trustees have loan accounts with the trust, SARS now requires more detailed disclosure and reporting.

Trust tax returns must include all beneficiary and Trustee details and information such as:

• Full name and surname

• Income tax numbers

• Identity Numbers

• Details of distributions made

• Loan balances and interest rates

This information enables SARS to cross-check trust disclosures against the beneficiary’s individual tax return and other reported information.

Where information is incomplete, inaccurate, or inconsistent, SARS may flag the trust for verification, further review, or audit.

Distributions to Foreign Beneficiaries

Recent tax law changes have increased the importance of proper planning where trusts distribute income to foreign beneficiaries.

In certain circumstances, amounts distributed to non-resident beneficiaries may be taxed in the trust at the trust tax rate (currently 45%), rather than flowing through to the beneficiary under normal conduit principles. The tax treatment will depend on the nature of the income, the beneficiary’s tax residency, and the specific facts of the distribution.

This makes it essential for trustees to:

• Obtain professional tax advice before distributions are made

• Ensure distributions are correctly structured and disclosed

• Understand the tax implications for both the trust and the beneficiary

Given the complexity of these rules, careful planning is important before making distributions to foreign beneficiaries.

Key Takeaways

The compliance responsibilities of trustees are becoming increasingly complex, particularly where beneficiary distributions, loan accounts, and foreign beneficiaries are involved. With SARS introducing enhanced reporting and cross-checking mechanisms such as the IT3(t) return, accurate disclosure and careful tax planning have become more important than ever.

Trustees should seek professional guidance to ensure that all trust reporting obligations are met correctly and that distributions are structured in a tax-efficient and compliant manner.

For assistance with trust compliance, SARS reporting, IT3(t) submissions, and trust tax planning, contact My Finance Partner at info@mfpartner.co.za