Much hype was made in the last budget speech regarding estate duty which is expected to raise R150 Million in Revenue.
But what exactly is estate duty and how does it affect your estate planning.
Estate Duty is essentially a wealth tax which commenced on the 1st April 1955 and is legislated under the Estate Duty Act 45 of 1955. Estate Duty is calculated as follows:-
Gross Value of Estate (Property and Deemed Property)
Total Allowable Deductions
= NET ESTATE
= DUTIABLE ESTATE
x (multiplied) by Percentage as Legislated
= ESTATE DUTY PAYABLE
What has however changed in the recent budget speech, and the point of this article, is the inclusion of a second tier percentage rate for calculating the dutiable amount.
Till now, once you had calculated your dutiable estate the amount was then multiplied by 20% and this became the amount of estate duty payable.
With the second tier being introduced, any amount below the R30 Million is calculated at 20% and any amount above R30 Million is calculated at 25%.
The calculation itself appears relatively simple, however what comprises property in an estate and what may or may not be deducted in terms of the Act can be quite tricky. Unfortunately the various provisions are too numerous to explain in a newsletter but should you so request, we will be happy to meet with you and go through an estate planning exercise.