Important SARS deadline for one group of South African taxpayers

Trustees of dormant or inactive trusts have a limited time to regularise outstanding tax returns, settle liabilities, or formally deregister before SARS begins imposing administrative penalties for non-compliance.

The South African Revenue Service (SARS) recently confirmed that the imposition of administrative non-compliance penalties on trusts has been deferred until 4 May 2026.

This was originally scheduled to commence earlier in 2026, but was extended to give trustees additional time to regularise their affairs.

Now that the grace period is over, the spotlight falls squarely on trusts that have outstanding tax returns, unresolved tax obligations, or incomplete deregistration processes.

Hobbs Sinclair Legacy’s Managing Director, Stacy Wallace, explained that this development comes against the backdrop of South Africa’s extensive trust sector.

In South Africa, many trusts established for estate-planning, asset protection, or family succession purposes remain registered long after their original objectives have been met.

In some cases, trusts cease operating altogether but remain on official records, creating compliance risks for trustees who assume no further action is required.

According to Wallace, one of the most common misconceptions is that an inactive trust no longer carries any compliance obligations.

“Many trustees assume that once a trust stops holding assets or conducting transactions, its obligations simply fall away,” she said.

“In reality, a trust can remain active on SARS’ records long after it has ceased operating in any meaningful sense.”

SARS has made it clear that trusts which no longer serve a purpose must still follow a formal process before they can be removed from the tax system.

This includes submitting all outstanding tax returns, settling any tax liabilities, and providing supporting documentation confirming the trust’s termination.

“Trustees should not confuse inactivity with deregistration. A trust that has effectively become dormant may still have filing obligations and other compliance requirements until SARS formally recognises its deregistration,” Wallace said.

What trustees should be doing

Even though administrative penalties are imposed on the trust itself, Wallace stressed that trustees remain responsible for ensuring that the trust complies with all tax and regulatory obligations.

“Trustees occupy a fiduciary position and are responsible for ensuring that a trust’s affairs are properly administered,” she said.

“Allowing a trust to drift into non-compliance can create unnecessary costs and complications that could have been avoided through timely action.”

The issue is particularly relevant for older family trusts established for estate planning, as well as for trusts created to hold specific assets that have since been sold, transferred, or distributed.

Wallace said it is not uncommon for trustees to discover that a trust has accumulated several years of outstanding returns after assuming no further action was required.

“Unfortunately, the passage of time does not remove the obligation to comply. In many cases, the longer a trust remains unattended, the more complicated and costly it becomes to rectify the position,” she said.

SARS has encouraged trustees and their representatives to use the additional time afforded by the deferral to resolve outstanding compliance matters and to submit deregistration requests where appropriate.

The revenue authority has also warned that failure to submit returns or to formally deregister trusts may result in ongoing compliance obligations and enforcement of administrative penalties.

Wallace recommended that trustees review all trusts under their administration to determine whether they remain active.

They should also confirm that all their tax returns have been submitted and ensure that SARS’ records accurately reflect each trust’s current status.

“The first step is understanding exactly where the trust stands from a compliance perspective. Trustees who are uncertain about their obligations should address the matter sooner rather than later,” she said.

“Once penalties begin accumulating, the cost of inaction can quickly outweigh the cost of resolving the issue properly.”

For trustees who have not reviewed a trust’s tax affairs in several years, Wallace added that the commencement of SARS penalties serves as a timely reminder.

Just because a trust is dormant does not necessarily mean it has been deregistered – and ignoring an inactive trust can become an increasingly costly mistake.