This question is frequently asked and debated in FISA and stakeholder meetings, and discussions show that many estate practitioners — and even SARS officials — remain unsure of the correct position.
In terms of “question and answer number 33” of Issue 4 of SARS’s Frequently Asked Questions on Deceased Estates, the deceased estate is liable for tax on any income earned during the advertisement period up to approval. This income must be declared in the deceased estate’s final income tax return, even though it does not appear in the income and expenditure account of the Liquidation and Distribution (L&D) account.
“Approval” refers to the last day of the three-week inspection period under section 35(5) of the Administration of Estates Act, 66 of 1965, if no objections are lodged, or if an objection is lodged but dismissed by the Master. If an objection is upheld and the account must be amended, or if the Master requires an amendment for any other reason, a new advertisement period follows. In such a case, “approval” refers to the last day of the new inspection period. The “approval” and inspection period apply to a final L&D account.
“Question and answer number 34” of the same SARS document states that any income earned after the L&D account is approved accrues to the beneficiaries (if any). The executor must inform the beneficiaries that they must declare such income in their own tax returns.
Issue 4 of SARS’s Frequently Asked Questions on Deceased Estates can be accessed here
Summarised by Jan du Plessis – FISA CEO