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Estate duty proposal aimed at high net worth individuals

Davis Tax Committee recommends that primary abatement should be increased to R15m.

JOHANNESBURG – The committee tasked with a comprehensive review of South Africa’s tax system has recommended that the ‘primary abatement’ – the portion of a net estate free from estate duty – be increased to R15 million.

This should be done irrespective of the individual’s marital status and the inter-spousal exemption should be withdrawn, the Davis Tax Committee proposed in its Second Interim Report on Estate Duty. Currently, amounts inherited by a spouse are free from estate duty.

Its first report on the issue, published for public comment in July last year, recommended that the primary abatement should be increased to R6 million per taxpayer from the current R3.5 million.

Should the committee’s proposal find its way into law, only high net worth individuals will essentially be liable for estate duty in future.

It also proposed that the estate duty rate should be increased from 20% to 25% where the dutiable value of the estate exceeds R30 million.

While the committee makes recommendations around tax policy changes to the minister, it does not necessarily mean that these recommendations will find their way into law.

“It must be recognised that the beneficiaries of an estate are largely dependent on passive income. Interest rates have effectively halved since the general abatement was last increased [in 2007], thus reducing interest income and/or accelerating the diminution of capital. Thus there is an urgent need for a generous increase of the general abatement,” the committee indicated on Wednesday.

It said a taxpayer’s house and personal effects could easily exceed R3 million, and even if the abatement was increased to R7.5 million, the remaining R4.5 million would not be sufficient to cover the needs of a middle class family should the breadwinner pass away.

Around 90% of the estates reported to the South African Revenue Service (Sars) during the 2014/15 fiscal year had a value of less than R15 million (see table below).

Screen Shot 2016-08-24 at 3.50.28 PM

Source: Davis Tax Committee

“However, their actual estate duty liability, R556 million, comprises 40% of the total estate duty collection of R1.406 billion. It can thus be concluded that the loss of estate duty associated with dramatically increasing the primary abatement is no cause for alarm,” the Committee said.

It estimated that the loss of estate duty collections (R556 million) would be recovered by the removal of the inter-spousal bequest exemption.

“This recommendation would have the added benefit of allowing Sars to concentrate its resources on the thorough examination of all dutiable estates with a value greater than R15 million. Based on 2015 statistics this would reduce the number of dutiable estates from 1 445 to a mere 135.”

Louis van Vuren, CEO of the Fiduciary Institute of Southern Africa (Fisa), says it is clear that the intention is to tax the estates of high net worth individuals rather than those of the middle class.

Finance Minister Pravin Gordhan appointed the Davis Tax Committee during his previous tenure in 2013, to assess South Africa’s “tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability”.

The committee said further investigation would be conducted into the implementation of wealth taxes. This will be addressed in a separate report later this year.

The committee also published its final reports on macro analysis and small and medium enterprises (SMEs) on Wednesday.

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The tax regime of this country seems to have no regard for the hard pressed wealthy person. Why should people pay estate duty to government at all you spend your live trying to create wealth for your family paying away paye; VAT; securities tax; fringe benefit tax; CGT; dividend tax; tax on investments; and a host of other taxes petrol, car license etc etc and then when you die you are subject to estate tax – yet this person has never been a drain on the fiscus in any sense whatsoever so does not deserve to pay estate tax – seems like just a final grab for taxes once the parties have died. Grave robbers comes to mind

Is this how it is going to work……or not.

I got say R15mill, dear wife has got say R5mill. My will leaves all to wife.

I die so no estate duty and wife now has R15mill extra to total R20mill. Wife dies next day with a total of R20mill in estate, so her estate pays estate duty of 20% on R5mill = R1mill.

Why on earth the collaborators are stuffing around with these small amounts boggles the mind, considering the billions being peed against the wall by cancer each year. What a waste of time and money by the collaborators.


Say its is the other way round. Me with R5mill and wife with R15 mill.

I die no estate duty but wife now has R20 mill but can only claim R15mill.

She then pays estate duty on R5mill which is in fact my R5 mill. In effect then my R5mill never got an estate duty rebate? If so then the removal of the inter-spouse bequest excemption is bad.

Confirm anyone???

Any comments Inge?


There are several countries, one of which is Cyprus, where there is NO estate duty.
I find it hard to believe that the ghouls at the Revenue authorities need to pick the pockets of the dead so they can line theirs and those of the government cadre who will just use the money for their own ends as they are doing now. After all, it is always presumed that the accumulated wealth of any deceased was already taxed in his life time.

It is no wonder people hide their wealth from these grave robbers.

Estate duty is a tax on inflation because most assets rise only with the rate of inflation (if you are lucky). Inflation in itself is a tax on the ordinary citizen as the purchasing power of his savings or salary, decreases as the revenue for the state increases.
Estate duty is thus a tax on a tax – double taxation. We must keep in mind that the state is in control of the rate of inflation. By simply opening the taps at the Reserve Bank, they create vast amounts of “hidden” taxes. In reality the only true purpose of a reserve bank is to create the maximum rate of inflation the majority of voters are willing to tolerate.

By raising the threshold for estate duty the Revenue Service are not giving us any discount or doing us any favor, they are merely stealing less.

End of comments.





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