The taxman is reaching back nearly a decade to calculate trust penalties

When the South African Revenue Service (Sars) introduced administrative penalties for outstanding trust returns from May 2026, many trustees assumed the penalties would simply relate to recent non-compliance. What is now emerging, however, is a far more nuanced and concerning implementation approach.

More significantly, the current rollout demonstrates that Sars is now able to leverage historic assessment data, prior taxable income records, and automated penalty calculation mechanisms in a far more sophisticated manner than many trustees may have anticipated.

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Historic trust assessments from nearly a decade ago are now directly influencing the level of penalties being imposed today.

While the current penalty campaign specifically targets outstanding trust returns for the 2024 and 2025 years of assessment, Sars appears to be calculating the actual penalty amount using historical assessed taxable income data from as far back as 2016 and 2017.

This distinction is important and can be financially significant. The underlying legislative mechanism for Sars determining fixed administrative penalties is not limited to trusts and may apply more broadly to other taxpayers as well.

‘Current non-compliance’

At present, Sars is issuing administrative penalties where trusts failed to submit the required ITR12T returns for the 2024 and 2025 tax years following the final demand process implemented earlier this year.

In other words, the non-compliance triggering the penalties is current. However, under section 210 of the Tax Administration Act, the monthly fixed penalty amount is determined with reference to the taxpayer’s “assessed loss or taxable income” from the most recent assessment issued by Sars.

This is where things become interesting … The Sars system is automated to exactly follow the law and establish penalty amounts for non-compliance from the last return issued.

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For many taxpayers, including trusts, the last assessed return on Sars’s system may date back several years because no subsequent returns were submitted or assessed thereafter.

In practice, we have seen Sars relying on historical assessments from as far back as the 2016 and 2017 years of assessment for trusts to determine the monthly penalty bracket applicable today.

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The age of the assessment itself is not the issue. The issue is the taxable income reflected on that historical assessment, because that amount determines the size of the recurring monthly penalty.

A trust with significant taxable income reflected on its last assessed return from 2017 for example, may therefore immediately fall into a substantially higher penalty category, even though the actual non-compliance relates only to 2024 and 2025 returns.

The result is that historical assessed income is effectively driving present-day penalties now being imposed.

Penalty exposure 

The monthly penalties currently range from R250 to R16 000 per month depending on the assessed taxable income bracket.

Importantly, the penalty is recurring and may continue for up to 35 months if the non-compliance is not remedied.

This creates potentially substantial exposure:

Monthly Penalty
Potential 35-Month Exposure

R250
R8 750

R500
R17 500

R1 000
R35 000

R2 000
R70 000

R4 000
R140 000

R8 000
R280 000

R16 000
R560 000

For trusts whose last active assessed years reflected sizeable taxable income, the penalties escalate rapidly.

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Many trustees mistakenly assume that where a trust holds no assets, generates no income, or has remained inactive for several years, its compliance obligations somehow fall away.

Similarly, trustees often regard a trust as “terminated” once the administration process has been concluded internally or at the Master’s Office, without recognising that the trust may still remain actively registered with Sars. This is not the Sars’s view.

From a Sars perspective, as long as a trust remains registered for income tax purposes and has not been formally deregistered through the Sars deregistration process, the trust continues to carry annual compliance obligations, regardless of its level of activity or whether trustees consider the trust dormant, inactive, or terminated.

Consequently, many trusts that trustees believed were no longer active are now being drawn into the current enforcement drive.

In numerous instances, the last assessment on Sars’s records dates back to 2016 or 2017, and those historic assessments are now being used to determine the monthly penalty amount applicable to the outstanding 2024 and 2025 returns.

The lesson is a harsh one: Inactivity or internal termination does not equate to formal Sars deregistration. From Sars’s perspective, a dormant, inactive, or “terminated” trust that remains registered but has not met its filing obligations is still regarded as non-compliant.

A clear signal from Sars

Trust compliance is no longer being treated as a passive administrative issue. Sars now has the data, systems, and legislative mechanisms to enforce compliance in a highly automated manner.

The recent rollout demonstrates two important realities:

Sars is actively enforcing outstanding trust return submissions for 2024 and 2025; and
Sars is willing to utilise historical assessment data, even from nearly a decade ago, to determine the level of penalties imposed today.

For trustees and advisors alike, this should serve as a warning that unresolved historical trust records can still have very real present-day consequences.

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Conclusion

The latest trust penalty assessments reveal an important technical reality in Sars’s implementation of the administrative penalty regime.

The penalties themselves are currently being imposed for outstanding 2024 and 2025 trust returns. However, the actual monthly penalty amount is often being determined using the trust’s last assessed taxable income — which, in some cases, dates back several years.

Read: Sars tightens its grip on tax penalties

If your trust has outstanding tax returns, now is the time to act. Waiting for Sars to issue penalties can prove far more costly than bringing the trust into compliance. Trustees should review their trust portfolio with Sars, identify any outstanding returns, and address filing obligations before additional penalties accumulate.

In an environment where Sars is increasingly relying on automated enforcement and historical data, proactive compliance is essential.

If you are unsure of your trust’s compliance status or have already received administrative penalty assessments, contact a qualified tax practitioner immediately. Early intervention may assist in limiting further exposure and identifying available remedies before the financial consequences escalate.

Sars has once again demonstrated that when it announces a compliance initiative, it intends to follow through. Increasingly, this is being done through sophisticated system-driven enforcement.

* Roxshanna du Toit is head of trusts, and Sidney Fletcher, senior manager of tax compliance at Tax Consulting SA.

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