It’s all systems go for the new retirement system, which allows employees to draw from their pension funds without the same penalties as before
The shoe is now on the other foot for southern EU states, with winter approaching and war next door
SA needs a new brand of leaders, says Randall Carolissen
Researchers have found that 96% of global health conferences happen in high- or middle-income countries. Fewer than four in 10 attendees at these gatherings are from poorer nations that have the ...
A new precinct planned around the high court in Joburg is yet another plan to fix the decayed CBD. But can this work, where previous plans haven’t? And can it really lure the lawyers back from ...
A few weeks ago, we featured a letter in which a reader asked what she could do with an inheritance for her four-year-old son. Put R500,000 into a unit trust in his name now, or open a unit trust in her own name with the intention of giving it to him when he turns 21? The reader also wanted to know whether to feed the money into a unit trust over time, bearing in mind the annual donations tax on any amount over R100,000. We have one last say on the matter.
The reader is correct in that any donation of more than R100,000 a year attracts tax at 20%, payable by the person making the donation. There is, however, no donations tax between married partners, so you could donate half to your spouse, if married, and then each could donate R100,000 a year to your child until you’ve donated R250,000 each, totalling R500,000.
But there is another option if you want to donate the money to your child now. You could make a R500,000 interest-free loan to them and they could invest the money immediately.
As an aside, if no interest rate is specified in a contract the law assumes no interest is payable.
Having loaned the R500,000, each year for the next five years you can make a R100,000 donation tax free to your child, offsetting the R500,000 interest-free loan. After five years, it would all be cleared.
You could speed up the process by doing it in conjunction with your spouse, each making a R250,000 loan that will be paid off with donations.
Importantly, keep records, starting with an interest-free loan agreement, then the annual donation and paying down of the loan. These records don’t need to be fancy, just documents recording the process every year for your records.
— Simon Brown
Send us your questions to firstname.lastname@example.org
Would you like to comment on this article? Register (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.