The South African Revenue Service (Sars) has released a draft notice under section 210(2) of the Tax Administration Act that formally proposes fixed administrative penalties for trusts that fail to submit their tax returns. Although still in draft form, this publication marks a clear shift from years of warnings to concrete action.

The notice states that a trust may be penalised if it does not submit its income tax return—starting from the 2023 year of assessment—within 21 business days after Sars issues a final demand. For trustees, this is a meaningful turning point: Sars is no longer signalling future enforcement; it is preparing to activate it.

The draft notice was published on 3 December 2025 for public comment. Comments must reach Sars by 28 January 2026.

Why This Matters Now

The industry has been anticipating stronger compliance measures for a long time. Sars’s increased focus on trusts—particularly around distributions, beneficiary information and loan accounts—has made it clear that the era of “low-risk non-compliance” is ending.

This draft notice confirms that administrative penalties for outstanding returns are no longer theoretical. The trust environment should now prepare for prompt and consistent enforcement once the notice is finalised.

What Trustees Need to Know

Trustees carry a legal duty to ensure that a trust meets all its tax obligations. This includes timely return submissions, accurate financial reporting, and maintaining full and reliable records. Should the new penalty framework be enacted, these responsibilities carry sharper consequences:

• Personal exposure: Trustees may face questions from beneficiaries if penalties reduce trust value or arise from governance failures.
• Fiduciary accountability: Non-compliance can constitute a breach of fiduciary duty if trustees fail to take reasonable steps to maintain the trust’s tax affairs.
• Operational disruption: Penalties can complicate future engagements with Sars, delay refunds, and trigger deeper audits or verification processes.
• Reputational harm: Persistent non-compliance signals weak administration, something Sars has expressly committed to addressing.

A Timely Opportunity to Catch Up

Even though the notice is still in draft, trustees should not wait for it to become final. Now is the time to:

• Review all outstanding trust returns
• Confirm that the trust’s financials and beneficiary records are complete
• Strengthen internal administration and compliance routines
• Respond swiftly to any Sars correspondence

The Bottom Line

Sars has moved from cautioning the trust sector to formally preparing the penalty mechanism. Trusts that have fallen behind on compliance should act now. Trustees who meet their obligations will be well positioned; those who delay are likely to face avoidable penalties and heightened scrutiny.

Written by Sidney Fletcher, Senior Manager: Trust and Deceased Estate Tax Compliance at Tax Consulting SA