Death and taxes

by Lileya Hanauer | April 9, 2024

Exploring the tax rules for inherited wealth in South Africa can seem like a complex puzzle. When someone passes away, there are financial considerations for their family, known as estate tax. This article breaks down the South African estate tax scene in simpler terms. We’ll look at how the tax is calculated, what parts of the inheritance may be exempt, and share some practical insights. Understanding these basics can help families make better decisions when it comes to managing and passing on their wealth.

When a natural person (taxpayer) dies, that person is called a ‘deceased person’ and all their assets on date of death will be placed in an estate, commonly known as a ‘deceased estate’. Assets in a deceased estate can include immovable property (house), movable property (car, furniture, etc), cash in the bank, etc. The person who administers a deceased estate is called an ‘Executor’.

All income received or accrued before the deceased’s death is taxable in the hands of the deceased person up until date of death and will be administered by the executor or administrator acting as the deceased’s representative taxpayer. A second income tax registration is required for the deceased estate if taxable income accrued to the deceased estate. This registration will be triggered by either the executor of the deceased estate or by SARS. The executor will be responsible for completing returns for each tax period from the date of death up to the time the Liquidation and Distribution account has been finalized.

Upon the death of an individual taxpayer, there are two types of assessments that must be considered: a pre-date of death assessment and a post-date of death assessment.

Pre-Date of Death Assessment

This assessment is for income and deductions applicable to the taxpayer up to the date of his/her death.

Post-Date of Death Assessment – Deceased Estate

This assessment is for income earned and deductions applicable to the deceased estate after date of death. For example, income flows to a deceased estate in two ways –

  1. a deceased estate will be taxed on any income that is received by or accrued to or in favour of any person in the capacity of the Executor, and
  2. any other amount which would have been income in the hands of the deceased person had they been alive.

Capital gains – Deemed disposal:

The deceased person is regarded as having disposed of his/her assets for an amount equal to the market value on the date of death.

This rule does not apply in the following circumstances:

  1. assets that are awarded to the surviving spouse;
  2. a long-term insurance policy of the deceased, of which the capital gain or loss would have been disregarded in terms of paragraph 55 of the Eighth Schedule;
  3. An interest of the deceased in a pension, pension preservation, provident, provident preservation, retirement annuity fund, or any fund, arrangement or instrument situated outside South Africa which provides similar benefits, and where the benefits would have resulted in a lump sum death benefit being paid out on which the capital gain or loss would have been disregarded in terms of paragraph 54 of the Eight Schedule.

A deceased estate is regarded as a natural person except that the estate does not benefit from the primary, secondary, or tertiary rebate and medical tax credits. This means that the deceased estate is taxed in exactly the same way that an individual taxpayer is taxed and relief provisions below are still available:

  1. capital gains annual exclusion of R40 000;
  2. capital gains inclusion rate of 40%;
  3. primary residence capital gains exclusion;
  4. personal-use asset capital gains exclusion;
  5. remainder of the capital gains exclusion amount not utilized by the deceased person;
  6. Section 25(5)(b) provides that if the deceased person was a resident at the time of his or her death, the deceased estate will also be regarded as a resident.

How is Estate Duty declared?

The executor will calculate the Estate Duty payable when preparing the liquidation and distribution account. The executor must complete the Estate Duty Return and must submit the return, together with the liquidation and distribution account to the Master of the High Court as well as to SARS.

SARS will most likely audit the final tax returns of the deceased as well as for the estate to ensure all income was declared.

Do you need assistance with Estate Duty or any other SARS compliance? Contact Dale Petersen on 021 819 7802 or at to connect with us.


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