What is estate duty?
Estate duty is the duty levied under the Estate Duty Act 45 of1955 (“the Act”) on the dutiable amount of an estate of a deceased person. Estate duty is a form of taxation.
How is the dutiable amount calculated?
The nett value of the estate is determined by adding property (section 3(2)) and deemed property (section 3(3)) together and thereafter subtracting permissible deductions (section 4). From this the abatement (section 4A) is deducted to determine the dutiable amount of the estate.
What is considered property and deemed property?
Property includes any right in or to immovable and movable property as well as corporeal and incorporeal property. Corporeal property refers to physical tangible property which can be seen and touched. Incorporeal property refers to intangible assets.
Deemed property refers to those assets which come into fruition in the event of your death such as life policies. In other words, any benefit received because of the passing of the deceased.
What are permissible deductions?
Allowable deductions include, inter alia:
- Funeral, tombstone and deathbed expenses (section 4(a)
- Debts and liabilities due by the deceased (section 4 (b))
- Administration and Liquidation expenses (Section 4 (c))
- Expenses incurred in carrying out regulatory requirements (section 4(d))
- Bequests to certain public benefit organisations (Section 4(h))
- Accrual claims under the Matrimonial Property Act
- Property accruing/left to a surviving spouse or life partner (section 4(q))
The below expenses are however not allowed as deductions under section 4(a):
- Flowers
- Wreaths
- News Advertisements
- Catering/Food/Drinks/Snacks/Tea/Coffee
- Marquee hiring/chairs and tables
- Restaurant bills
- Transport of people/attendees/family members to the funeral/grave
- Premiums paid prior to death in respect of a funeral policy
What is the current Section 4A Abatement?
Since 1 March 2007 the abatement deductible against the nett value of the estate is R3 500 000. From 1 January 2010 the abatement available to the surviving spouse on his/her death is R7 000 000 less as much of the abatement used by the first dying.
What is the current rate of estate duty?
Estate Duty is levied on the dutiable amount of an estate at a rate of 20% on the first R30 000 000 and at a rate of 25% on the dutiable value of the estate above R30 000 000.
When is estate duty due and payable and to whom?
Estate duty is payable within one year of date of death or 30 days from date of assessment, if the assessment is issued within one year of date of death. Currently interest is levied at 6% per annum on late payments. Estate duty is payable to the South African Revenue Services.
Source: Estate Duty Act 45 of1955 & SARS Estate Duty