SARS's 2026 Trust Filing Season Brings Real Penalties for the First Time: Here's the Legal Detail Behind It

For years, a trust that missed its ITR12T deadline faced a comparatively soft consequence in practice. That changed on 4 May 2026, when SARS began issuing AP34 penalty assessment notices to trusts under its existing administrative non-compliance penalty framework, the same automated, income-scaled monthly penalty structure long applied to individual taxpayers, extended to trusts for the first time. The penalties are automatic and accrue monthly for as long as a return remains outstanding, on a scale reported to run from roughly R250 to R16,000 per month depending on the trust's income, for up to 35 months, with interest continuing to accrue on any unpaid tax separately. Crucially, this isn't limited to non-compliance from this season forward: SARS has applied it retroactively to outstanding ITR12T returns from the 2024 year of assessment onwards, meaning a trust with old, unfiled returns sitting in its history is already exposed, regardless of whether it files this season's return on time.

SARS has been explicit about where it intends to focus scrutiny. Nil returns and assessed-loss positions are flagged for particular attention this season. A trust cannot simply file a nil return on the basis that it holds passive assets and generated no active income — SARS has stated directly that a holiday home or other immovable property, and the income and expenditure connected to it, must still be declared even where the trust conducts no trading activity. SARS says it will analyse inconsistencies in nil and assessed-loss filings specifically to identify under-reporting.

Trustees should also note that filing is not the only obligation running on its own clock this season. A separate return, the IT3(t), reports every amount vested to a beneficiary during the year — income, capital gains, and capital distributions — and is due 30 September 2026, a full four months ahead of the ITR12T deadline itself. A nil IT3(t) is required even where nothing vested. SARS has confirmed that late or non-submission of the IT3(t) does not currently attract its own administrative penalty, though it has signalled that may change. The practical risk runs deeper than the IT3(t) deadline alone, though: this year's enhanced ITR12T pulls its income, vested-amount, and beneficiary-schedule data directly from IT3(t) submissions to pre-populate the return. An inaccurate or late IT3(t) doesn't just create a standalone compliance gap — it feeds directly into the return that actually determines the trust's tax liability.

This is the more legally intricate of the two substantive changes, and it's worth working through precisely, because the amendment changes an outcome that previously didn't change at all.

Section 7(5) is one of the Income Tax Act's anti-avoidance attribution rules: where a donor has made a donation, settlement, or disposition to a trust subject to a stipulation or condition, most commonly, that the donor (or someone nominated by the donor) will benefit from the trust's income upon the occurrence of some future event, the income is deemed to have accrued to the donor, not the trust or its beneficiaries, for as long as that condition remains unfulfilled. Historically, that deemed accrual to the donor persisted regardless of what happened to the donor personally, stopping only when the stipulated condition or event actually occurred, or when the donor died.

The 2026 amendment adds a third trigger SARS had not previously recognised: the donor ceasing to be a South African tax resident. From a year of assessment starting on or after 1 March 2026, if a donor subject to section 7(5) attribution emigrates and ceases South African tax residence, the deemed accrual to that donor ends at that point; even though the original stipulated condition has not occurred and the donor is still alive. Before this change, SARS's position would have continued attributing the trust income to that donor indefinitely, non-resident status notwithstanding, until the condition was eventually met or the donor died; an outcome that, in practice, could leave SARS attempting to tax income in the hands of someone no longer resident and potentially far harder to pursue.

What happens to the income once that attribution stops is the more consequential question, and it's where section 25B comes back into the picture. Section 25B is explicitly subordinate to section 7 — where section 7 attribution applies, it overrides section 25B's ordinary rules entirely. Once a donor's section 7(5) attribution ends because of emigration, the income falls back to being tested under section 25B on its own terms: taxed directly in the hands of a resident beneficiary with a vested right, or, where the beneficiary is non-resident, taxed inside the trust itself at the trust rate. For advisors, this means a donor's emigration doesn't simply remove that person from the tax equation; it can shift where and how the trust's income is taxed going forward, and that shift needs to be actively reviewed on a case-by-case basis rather than assumed.

Historically, South African trust law operated on a straightforward conduit-pipe principle: income vested in a beneficiary with a vested right was treated, for tax purposes, as if it had accrued directly to that beneficiary; retaining its character and source — rather than being taxed inside the trust. That principle applied regardless of the beneficiary's residence.

That changed for non-resident beneficiaries. Per SARS's own Comprehensive Guide to the ITR12T, with effect from 1 March 2025, section 25B was amended to limit the flow-through principle to resident beneficiaries only. All income and capital gains distributed to a non-resident beneficiary are now taxed in the hands of the trust itself, at the trust's tax rate — regardless of the income's original source or character — unless section 7's attribution rules apply instead and redirect the tax liability to a donor. SARS and National Treasury's own response document on the amendment, addressing stakeholder concerns raised during the legislative process, has previously acknowledged the change can produce economic double taxation, since the trust may pay South African tax on the same amount a non-resident beneficiary is separately taxed on in their own country of residence — and SARS's position has been that this is a foreseeable, accepted consequence of the amendment rather than a defect requiring separate relief.

SARS's own stated rationale for the change, articulated when the amendment was first proposed, was practical rather than purely doctrinal: non-residents are frequently not liable for South African tax on amounts that don't have a South African source, tax recovery actions against people who have left the country are difficult to enforce, and where a beneficiary is itself a non-resident trust, SARS often has no visibility into who ultimately benefits behind that structure. Taxing the income inside the South African-resident trust — an entity SARS can actually reach — closes that enforcement gap directly.

This is squarely relevant this filing season because SARS's own materials describe a further clarification of exactly how section 25B interacts with section 7 as applicable from 1 March 2026 — the same effective date as the section 7(5) donor-residence trigger discussed above. Trustees and advisors handling any trust with a non-resident beneficiary, or a donor who has recently emigrated or is contemplating it, should treat this season's return as the point to actively re-test both provisions together, not assume last year's treatment still holds.

A handful of further technical changes round out this year's filing environment, each worth a brief, precise note: the statutory definition of a "trust" has been amended to expressly include a portfolio of a collective investment scheme and a portfolio of a hedge fund collective investment scheme. Trusts may now claim foreign tax credits on income or capital gains earned abroad, capped at the portion of South African tax attributable to that income, with any excess carried forward for up to six years; SARS says it will track these carryovers itself. A new wizard question has been added to the ITR12T addressing the loss-limitation rules in section 25B(4)–(6), intended to help SARS (and, over time, refine the return itself) assess how those limitation provisions affect a trust's net income calculation. And the return now supports continuous saving, reducing the risk of losing captured data mid-session — a small operational change, but one SARS has specifically flagged as reducing a common practical complaint from trustees and practitioners in prior seasons.

Who must act, and what specifically changes: Every registered resident trust, and qualifying non-resident trusts, must file an ITR12T by 22 January 2027, and must have already filed (or must urgently file) any outstanding IT3(t) by 30 September 2026. Trustees remain personally accountable for the accuracy of the return even where a tax practitioner prepares it — SARS has stated this explicitly and repeatedly in its own communications this season.

Financial and operational exposure: The administrative penalty framework's retroactive reach to the 2024 year of assessment is the single most consequential practical fact this season for any trust with a filing gap in its recent history — this is not a forward-looking deterrent only, it is already being applied. Trusts with non-resident beneficiaries, or donors who have emigrated or plan to, face a materially more complex tax position than in prior years and should have that position actively reviewed rather than carried forward unchanged. Passive and dormant trusts holding property or other assets should not assume nil-return status is safe from scrutiny; SARS has specifically flagged this category for review.

Realistic timeline: IT3(t) due 30 September 2026. ITR12T due 22 January 2027. The second provisional tax payment for the 2027 assessment year falls shortly after, on 28 February 2027. Given the pre-population dependency between the two returns, trustees should treat the IT3(t) deadline as the practical starting point for the season, not an afterthought ahead of the January deadline.

What remains uncertain or pending: Whether SARS will introduce a standalone penalty for late or non-submission of the IT3(t) itself, as it has signalled it may, remains unconfirmed. The precise mechanics of how the section 7(5) and section 25B "clarification" interact in edge cases — for example, a donor who emigrates partway through a year of assessment — were not detailed in available secondary sourcing and would benefit from direct SARS guidance or an Interpretation Note.

Does a dormant trust with no income still need to file? Yes. SARS has stated that every registered trust is a taxpayer regardless of activity level, and that passive trusts holding assets such as immovable property must still declare related income and expenditure rather than filing a blanket nil return.

Can SARS penalise my trust for a return I never filed two years ago? Yes. The administrative non-compliance penalty framework introduced for trusts applies to outstanding ITR12T returns from the 2024 year of assessment onwards, not only to non-compliance arising in the current season.

What happens to trust income taxation if the donor emigrates? If the donor was previously subject to section 7(5) deemed-accrual attribution, that attribution now ends once the donor ceases South African tax residence, effective for years of assessment from 1 March 2026 onward. The income then falls to be taxed under section 25B's ordinary rules instead — directly to a resident beneficiary with a vested right, or inside the trust itself if the beneficiary is non-resident.

Is income vested in a non-resident beneficiary still taxed in that beneficiary's hands? No, generally. Since the amendment to section 25B (effective from 1 March 2025 per SARS's own guidance), the flow-through principle applies only to resident beneficiaries. Amounts vested in non-resident beneficiaries are taxed inside the trust itself, unless section 7's attribution rules redirect the liability to a donor instead.

Is the IT3(t) the same as the ITR12T? No. The IT3(t) is a separate third-party data return reporting amounts vested to beneficiaries, due 30 September 2026. The ITR12T is the trust's own income tax return, due 22 January 2027, and this season draws its pre-populated income and beneficiary data directly from the IT3(t).

If my tax practitioner prepares the return, am I still liable for errors in it? Yes. SARS has stated explicitly, repeatedly, and in this season's own communications that trustees remain accountable for the trust's tax compliance even where a practitioner assists with preparation.