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In this issue:
jse listed Exchange Traded Funds (ETFS)
The current Satrix, Absa Capital & db x-trackers fund administration is performed by Automated Outsourcing Services (AOS), appointed by the product providers to administer the investment plan accounts and trading activities.
The South African Investor now has access to a wide range of Exchange Traded Funds (ETFs) through Itransact, a new administration platform from AOS.
(Itransact is Automated Outsourcing Services (Pty) Ltd, (AOS) a licensed administrative financial services provider in terms of the Financial Advisory and Intermediary Services Act)
Benefits of the Itransact Platform:
- Multiple ETF funds in one platform
- One application form
- One payment
- One statement
All at no extra costs (same administration platform fees through AOS).
[25 ETFs in total]
Available Exchange Traded Funds (ETFs) on the AOS Itransact platform:
- Satrix: Top40, Indi, Fini, Swix, Resi, Divi, Rafi
- db x-trackers (Deutsche Bank): DJ Euro Stoxx 50, FTSE100, MSCI ETFs
- Absa ETFs (Absa Capital): NewRand, NewGold, NewSA, Shari'ah, eRAFIT
- Zshares (Investec): GOVI
- Proptrax: SA Listed Property Index Tracker
- BIPS (RMB): Bips ftse/jse top 40, Government Inflation Linked Bond
- BettaBeta (Nedbank Capital): BettaBeta Equally Weighted Top 40
For your convenience please follow this link to a short form, Itransact ETF Platform , to request more information and how to apply.
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Trusts: taxes and cost
Trusts can offer a solution to many situations, but are not necessarily the solution to all problems.
Before a trust is created, the workings and the tax and costs implication thereof must first be understood. Uninformed decisions could lead to regrets later. Savings in the short - and long term should be weighed up.
Calculation of income tax of an individual and a trust
An individual currently pays income tax of between 18% and 40% on a sliding scale and enjoys other benefits such as the primary rebate, exemption in respect of interest earned, and the deduction of medical expenses.
Trusts, excluding special trusts, are currently taxed at the minimum rate of 40% on undistributed net income. In the case of discretionary trusts, the income distributed to one or more income beneficiaries taxed in their hands at their marginal rate.
Calculation of capital gains tax (CGT) of an individual and a trust
In the case of an individual, CGT is payable on 25% of the capital gains after the deduction of the current exception applicable to a residential dwelling and a rebate. If one's marginal income tax rate is 40%, the net effect of CGT is 10%.
In the case of a trust, CGT is currently payable on 50% of the capital gains if he relevant asset has not vested in the name of the capital beneficiary. A trust does not qualify for the exemption applicable to a residential dwelling, for example. As a trust is taxed at 40%, the net effect of CGT is 20%
Calculation of transfer duty of an individual and a trust
An individual currently does not pay and transfer duty on the first R500 000 of the purchase price of a fixed property. After that, it becomes payable and is calculated at 5% on up to R1 000 000 and then at 8%. A trust pays 8% from the first rand.
Trustees' fees
Unlike executor's fees, trustee's fees are not determined by legislation and regulations. However, as in the case of executor's fees, the fees of trustees may be negotiated and agreed beforehand and stipulated in a deed of trust or a will. If such fees are not determined beforehand, a trustee is entitled to a reasonable and acceptable marker-related fee.
The Master of the High court may become involved in the event of a dispute regarding fees.
How does one know if the costs one incurs now, as well as future costs and taxes, will be to one's benefit in the long run?
Current costs for the creation of a trust and the transfer of assets can be calculated, but future costs, as well as trust management costs and taxes, must be calculated on the basis of what is known and payable.
Trusts can exist for a specific or indefinite period, which can be long term in most cases. Death is unpredictable, but by means of comparisons based on the short term and on one's life expectancy, estimated comparisons can be made with, for example, savings on estate duty and executor's fees. Lower executor's fees may be stipulated in a will. There are various ways in which estate duty can be saved, for example by means of a properly and correctly drawn-up will.
The primary rebate transferable between spouses, which came into effect on 1 January 2010, should be taken into consideration
Are there any short-term benefits if one's assets are sold to a trust?
Should one die within a reasonable short period after having sold one's assets to the trust, the proceeds thereof and/or the loan account for the financing of the purchase price will be an asset in one's estate.
One would then enjoy minimal benefits and savings and would have incurred costs only of the value of the assets in trust differs from the proceeds that are an asset in one's estate.
The longer one lives after the implementation of the trust, the greater the potential benefits. However, the next generations will continue to benefit from it.
Should costs and taxes be one's only consideration?
No. One should, inter alia, take into account the preservation of one's assets, particularly for one's descendants.
Agricultural property, which in term of existing legislation cannot be transferred in uneconomical units, could be transferred into the name of a trust.
When one dies, there will be continuity and funds will not be frozen, provided that the surviving trustee may carry on alone.
The Estate Duty Act, however, provides for funds in one's personal name to be made available if required for immediate maintenance needs and funeral costs; and proceeds of policies, in respect of which beneficiaries were appointed, may also be a solution.
Important comment
The Revenue Laws Amendment Act of 2009 allows a window period of around two years until 31 December 2011, for individuals holding a residential dwelling in the name of a trust to transfer the property to their name without paying any taxes (CGT, transfer duty, etc.) - but only transfer costs.
Courtesy: Sanlam Trust
Read more about Wills and Trusts
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