Month: October 2017

THE BENEFITS OF CREATING A TRUST

Trusts are well-known to facilitate effective estate planning and continuity planning strategies. That said, setting up a trust – whether an inter vivos (between the living) or a testamentary (created in a will) − should be carefully considered and not just implemented blindly. 

The difference between testamentary and inter vivos trusts

  1. A testamentary trust is established when a person (the founder) makes provision for establishing a trust in their will. The trust does not come into existence until the founder dies.
  2. An inter vivos trust is set up between the living. In other words, property is transferred before death to the trust by its founder and managed by the trustees for the benefit of another person or persons.

The death benefits of creating an inter vivos trust exceeds the cost – both in time and money. According to The Estate Duty Act, upon death, a duty is levied against your estate known as estate duty. The nett value of any estate will be determined by deducting all liabilities from your assets of your estate, both real and deemed.

Should you create a testamentary trust, upon death the assets are in your name and will need to be transferred to the trust posthumously, meaning all assets are taken into account when assessing the duty payable.

Advantages

Taking the above into account, here are some benefits you could experience from creating a trust:

  1. Reducing estate duty: Inter vivos trusts can be used to minimise estate duty. No estate duty should be payable on assets owned by the trust as a trust does not die.
  2. Protection against creditors: As the trust’s assets are not owned by the beneficiaries, creditors do not have a claim on the assets. This advantage is especially important for people who could be exposed to potential liability. Companies as well as individuals are able to transfer assets into trusts.
  3. Efficient succession: Since trusts never die, beneficiaries will be able to continue enjoying the assets if one beneficiary were to pass away. 

Disadvantages

Despite the advantages, there are also some disadvantages of having a trust. They include the following:

  1. Costs: The costs of setting up a trust can be high. If assets are transferred into the trust, then transfer duty needs to also be paid.
  2. Duties of trustees: Trustees could find themselves personally liable for losses suffered by the trust if it can be proven that they did not act with care, diligence and skill according to Section 9 of the Trust Property Control Act.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

References:

 

https://www.iprotect.co.za/articals-trust-info/article-arcives/why-an-intervivos-trust-as-opposed-to-a-testamentary-trust.html

http://www.entrepreneurmag.co.za/advice/starting-a-business/start-up-advice/should-i-set-up-a-trust/

https://www.findanattorney.co.za/content_inter-vivos-trust

EMPLOYERS BEWARE: DISMISSAL FOR POOR PERFORMANCE COULD BACKFIRE

It is reasonable to want to dismiss an employee for not performing on the job, or failing to meet a specific target. However, Employer’s should ensure that the targets they set are actually achievable for the employee. If not, they could be found at fault for dismissing an employee who failed to achieve unreasonable targets.

Damelin (Pty) Ltd vs Parkinson

In a recent judgement, delivered in January 2017, tertiary education company Damelin (Pty) Ltd, hired Parkinson as the general manager of the Boksburg campus. Parkinson’s employment contract stated that, ‟continued nonattainment of performance goals may result in the termination of employment.”

When Parkinson took up his position in January 2011, the campus had 352 enrolled students of which 168 were first-year students. His target for 2012, which was the national target, was to enrol 420 first year students by February 2012. Andrew Pienaar, the national sales director, estimated that there were 15 000 grade 12 learners in the catchment area the Boksburg campus. Parkinson queried the target, saying that his team contacted all the schools in the area and there were only 12 735 grade 12 learners in his area. He claimed that unrealistic numbers give rise to unrealistic targets, and that it was like being set up to fail.

The actual enrolment of first-year students for the Boksburg campus for 2012 was 117 first year students. In 2011, the figure had been 168. Parkinson had not met the target. A disciplinary inquiry was convened. Parkinson was charged with poor work performance relating to his failure to reach sales targets and was dismissed.

Unhappy with his dismissal, Parkinson and his union went to the CCMA. The commissioner determined that the dismissal was the appropriate sanction. Still dissatisfied, Parkinson then went to court. The court determined that dismissal could only be considered as a fourth step. The court set aside the award and reinstated Parkinson saying that the informal letters written to Parkinson could not be considered warnings, and that he was not given an appropriate amount of time to reach his targets.

Conclusion

Setting unrealistic expectations on employees could set them up for failure. In these circumstances, dismissal would not be appropriate. It is therefore important that employers ensure the standards they set for their employees are achievable within a reasonable amount of time.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

References:

Case no: JA 48/15

HOW CAN AN UNMARRIED FATHER OBTAIN PARENTAL RIGHTS AND RESPONSIBILITIES?

Under the old dispensation, where parties were divorced, one parent (usually the mother) would usually be awarded custody of a minor child and the other parent (usually the father) would be entitled to visitation rights.

The custodian parent would be vested with making all of the day-to-day decisions of the minor child including which school the child would attend, what religion the child would practice, where the child would reside and so on.

The parents now have joint parental responsibilities and rights, and all major decisions relating to the minor child need to be taken by the parties jointly, which is a far healthier situation for the child.

  • If the unmarried father only wants to apply for care and/or contact, he can do so in the Children’s Court.
  • If the unmarried father wants to apply for guardianship, an application must be made in the High Court.
  • If the unmarried father wants to apply for care, contact and guardianship, he must bring the application in the High Court.

An unmarried biological father may ask a court of law to grant him full parental responsibilities if he:

  • at the time of the child’s birth, is living with the mother in a permanent life partnership, or
  • consents to be identified as the child’s father, or
  • successfully applies to be identified as the child’s father, or
  • pays damages in terms of Customary Law, or
  • contributes or has tried to contribute to the child’s maintenance and upbringing for a reasonable period.

What factors will the court take into account when considering an application for parental rights and responsibilities?

  • The best interests of the child.
  • The relationship between the unmarried father and the child.
  • The relationship between any other person and the child, such as the mother.
  • The degree of commitment the unmarried father has shown towards the child.
  • Whether the unmarried father has contributed or attempted to contribute to the maintenance of the child.
  • Any other factor the court considers to be relevant, such as:
    • whether the unmarried father has a history of violence towards children;
    • the effect of separating the child from his/her mother; or
    • the child’s attitude towards the relief sought in the application.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

References:

https://www.legalwise.co.za/help-yourself/quicklaw-guides/unwed-father/

http://www.parent24.com/Family/Finance_Legal/Unmarried-Know-your-rights-20150826

THE VALIDITY OF TAX INVOICES – IT IS YOUR RESPONSIBILITY

The audits of Value-Added Tax (VAT) returns by the South African Revenue Service (SARS), have increased the focus on the validity of tax invoices for the purposes of VAT.

A VAT vendor submitting VAT returns is responsible for ensuring that all invoices included in the returns comply with the relevant legislation. If valid tax invoices cannot be provided at the time of a VAT audit, the vendor may lose up to 100% of the input tax being claimed on the invoice, even if an amended valid invoice can be provided subsequent to the audit. Furthermore, serious penalties, interest and other consequences may be imposed on the VAT vendor for errors, intentional omissions and fraud.

The requirements

Section 20 of the Value-Added Tax Act, no 89 of 1991, together with the VAT404 Guide for Vendors as updated in March 2012, sets out the requirements for a valid tax invoice.

A VAT vendor must issue a tax invoice within 21 days of the supply having been made where the consideration for the supply exceeds R50, whether the purchaser has requested this or not. If the consideration for the supply is R50 or less, a tax invoice is not required. However, a document such as a till slip or sales docket indicating the VAT charged by the supplier, will be required to verify the input tax.

The requirements for tax invoices of which the consideration or taxable supply is more than R5 000 are:

  1. the words “tax invoice” should be displayed;
  2. name, physical address and VAT registration number of the supplier name, physical; address and VAT registration number of the recipient;
  3. original serial number of the tax invoice;
  4. the date of issue of the tax invoice;
  5. full and proper description of the goods sold and / or services rendered;
  6. quantity or volume of goods and / or services supplied; and
  7. total amount of the invoice and VAT amount in South African currency (except for certain zero-rated supplies).

The requirements for tax invoices of less than R5 000 are:

  1. the words “tax invoice” should be displayed;
  2. name, physical address and VAT registration number of the supplier;
  3. original serial number of the tax invoice;
  4. the date of issue of the tax invoice;
  5. full and proper description of the goods sold and / or services rendered;
  6. total amount of the invoice and VAT amount in South African currency (except for certain zero-rated supplies).

Second-hand goods

In the case of second-hand goods purchased from a non-vendor, the purchaser has to record the following information:

  1. name, address and identity number of the supplier, confirmed by the person’s identity document or passport. (If the value of the supply is equal to or greater than R1 000, a copy of this document must be retained by the purchaser. If the non-vendor is a juristic person, a letterhead or similar document stating the name and registration number of the juristic person is required);
  2. date of acquisition;
  3. quantity or volume of goods;
  4. description of the goods;
  5. total consideration paid for the supply; and
  6. declaration by the supplier stating that the supply is not a taxable supply.

Conclusion 

If a vendor fails to deduct an input tax in respect of a particular tax period, that input tax may be deducted in a later tax period, but limited to a period of five years from the date that the particular supply was made. However, when a vendor becomes aware of an output tax not declared in the relevant period, a corrected VAT return for that specific period should be submitted.  It is not acceptable to declare the output tax in the next period and SARS may impose penalties and interest on the output VAT omitted.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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