Changes to tax law in South Africa

South Africans have new opportunities to reduce estate tax liabilities following changes to donations and capital gains tax announced in the 2026 Budget.

This is according to DBM Attorneys, which said the amendments affect how individuals plan their estates and how deceased estates are administered.

The law firm explained that estate planning requires consideration of asset transfers, tax liabilities, and liquidity to ensure an estate can meet its obligations after death.

South Africa’s 2026 Budget contained one of the most significant changes to estate planning in years.

The Budget increased the annual donations tax exemption for natural persons from R100,000 to R150,000 per tax year.

This creates an opportunity for individuals to gradually transfer wealth during their lifetime without triggering the donations tax.

For example, a parent who donates R150,000 per year for 10 years could transfer R1.5 million from their estate without incurring donations tax.

At an estate duty rate of 20%, DBM Attorneys said this could reduce future estate duty by R300,000.

Married couples can make separate donations of R150,000 each. This would allow them to transfer up to R300,000 a year without donations tax, provided the relevant requirements are met.

However, these donations should be properly documented. Records should clearly identify the donor, recipient, date, and value of the donation.

This can help substantiate the exemption and reduce complications if the South African Revenue Service (SARS) reviews the estate.

DBM Attorneys explained that the 2026 amendments also increased the capital gains tax exclusion in the year of death to R440,000.

Death is generally treated as a deemed disposal of a person’s assets at market value for capital gains tax purposes. This means capital gains tax can arise in the deceased’s final tax return.

The higher exclusion provides additional relief where a deceased person held assets that had increased substantially in value.

These assets could include property, listed shares, unit trusts, business interests, and investment portfolios.

DBM Attorneys said the change also demonstrates the importance of obtaining accurate valuations when someone dies.

Executors should secure date-of-death valuations as soon as possible, along with purchase records, details of capital improvements, and investment statements.

Without proper records, determining the correct base cost and capital gain can become difficult. This can lead to SARS queries and delays in finalising an estate.

Estate duty rates and trusts

DBM Attorneys stressed that the changes do not alter the existing estate duty rates. Estate duty remains payable at 20% on the first R30 million of a dutiable estate and 25% on an amount above R30 million.

The estate duty abatement also remains at R3.5 million. For wealthier South Africans, this means estate duty can remain a significant liability. However, it is not the only cost to consider.

An estate may also need to settle capital gains tax, executor’s fees, conveyancing costs, bond cancellation fees, and other administration expenses. This makes liquidity an important part of estate planning.

An estate consisting of property, farming assets, business interests, or other illiquid investments may not have enough cash to meet these obligations.

In such cases, DBM Attorneys said the executor could be forced to sell assets to settle the estate’s debts and taxes.

A good estate plan should consider not only who receives the assets but also whether the estate has sufficient cash to meet its obligations.

DBM Attorneys said the tax changes provide an opportunity for South Africans to review their wills.

A will should reflect a person’s current family circumstances, assets, and estate-planning objectives. However, these can change over time.

Trust structures should also be reviewed regularly. Trusts can play an important role in succession planning and asset protection, but they should not automatically be viewed as tax-saving structures.

Trustees must ensure that trust deeds remain relevant and that resolutions, financial records, and loan accounts are properly maintained. They must also meet applicable beneficial ownership reporting requirements.

Poorly administered trusts can create unnecessary complications when an estate is eventually administered, they warned.

Administration remains essential

DBM Attorneys pointed out that the changes also have implications for the administration of deceased estates. Executors must identify and verify lifetime donations and obtain accurate valuations.

They must also calculate the deceased’s capital gains tax and estate duty liabilities and ensure that the required SARS returns and supporting documents are submitted.

The Liquidation and Distribution Account must accurately reflect the estate’s assets, liabilities, taxes, and proposed distributions.

Premature distributions should be avoided where SARS assessments remain outstanding, creditor claims have not been finalised, or disputes between beneficiaries remain unresolved.

DBM Attorneys said careful administration is essential to protect the estate and its beneficiaries.

While the 2026 amendments do not fundamentally change South Africa’s estate planning framework, they do provide individuals with additional tools to manage future tax liabilities.

The higher donations tax exemption allows wealth to be transferred during a person’s lifetime, while the increased capital gains tax exclusion provides additional relief when assets are deemed to be disposed of on death.

DBM Attorneys said South Africans should use the changes as an opportunity to review their wills, trusts, donation strategies, and estate liquidity.

Executors and trustees should maintain accurate records and proper administration, as this is critical to applying the amended tax rules correctly.