Is a voucher still the perfect gift?


On 12 January 2021, the Gauteng High Court delivered judgement in the matter of MTN (Pty) Ltd v CSARS (79960/2019) [2021], in respect of a declaratory order that MTN sought to confirm their interpretation of the VAT treatment of certain airtime vouchers. The VAT Act distinguishes between two types of vouchers – those that can be used for unknown goods and services at the time of issue (consider, for example, a retail shopping voucher); and those vouchers that can be spent on specific goods and services (in other words, not able to be used for goods and services other than those specified).

Although the VAT consequences of the issue of the vouchers ultimately are the same, the matter becomes relevant for the time at which output tax should be paid in respect of the transaction. Section 10(18) of the VAT Act deals with general vouchers, whilst section 10(19) deals with vouchers for specified goods or services. In the case of general vouchers, the VAT output liability is delayed until such a time that the voucher has been exchanged or redeemed for goods or services – this is the case since, at the time of issue of the voucher, it is unsure what those goods or services might entail. For example, a grocery voucher that could be spent on either standard-rated items or zero-rated fresh produce. In the case of vouchers for specified goods or services, the types of goods or services are already known at the point in time when the voucher is issued, and at which time the output tax is levied. In both instances, output tax is levied on the value of the voucher – but in the former situation, the timing can be significantly delayed, depending on how long the voucher is valid for.

MTN requested the court to confirm their treatment of “airtime vouchers” which can be spent on SMSs, data, or cell phone calls; and indeed, that it constituted a general voucher as opposed to a specified voucher. The court did not agree with MTN’s interpretation and indicated that the vouchers are indeed specified since it related to “airtime”. MTN would therefore accordingly be liable for output tax at the point in time when such vouchers are issued. Unfortunately, the court did not provide sufficient insights into their reasoning and the judgement has received substantial criticism from those in the industry.

 We expect this judgement to go on appeal in 2021 as it could have a significant impact on any vendors who issue vouchers to the general public.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Tax legislative amendments: How does it work?


As we approach the (expected) 24 February 2021 Budget Address by Finance Minister, Tito Mboweni, it is useful to consider how the proposed tax amendments raised during the Budget Speech eventually become law. As a starting point, it is important to remember that the South African Revenue Service (SARS) does not make tax law. In South Africa, Parliament is responsible for the law-making process and promulgation of acts by the President. Of course, SARS has a role to play in the legislative process since they are ultimately the tax law administrators. Still, the prerogative and responsibility of those laws remain that of Parliament.

Over the last several years, the annual tax legislative amendment cycle takes approximately ten months – this is rather frustrating for taxpayers as it essentially only provides two months’ worth of transactional certainty before the next amendment cycle starts. Not all those tax amendments are delivered as part of the Minister’s Budget Speech – the more detailed tax amendments are included in Annexure C to the budget. This document outlines the board issue/problem faced by the fiscus and usually indicates that an amendment of some sort can be expected, in respect of that particular matter.

At this stage, taxpayers merely expect that provisions of the Act might be amended. During June/July, following the Budget Speech, the draft taxation amendment bill and draft explanatory memorandum on that bill is released by National Treasury. Thereafter, the public is afforded approximately four to six weeks to make representations to National Treasury, providing their inputs and commentary on the proposed amendments. A series of workshops are held in Parliament to address the draft amendments, as well as the public comment that has been received. These consultations are followed by a discussion document where the outcomes and suggestions from the public are either incorporated in the draft bill, or reasons are provided for not accepting the inputs of the public.

The aforementioned process plays out over several months, and the “final” bills are usually released toward the end of November or early in December of a particular calendar year. This does not mean that the amendments are law yet – the amendments only become law once the President has promulgated the bill which, lately, has occurred late in January the following year – only about four to six weeks before the next Budget Speech – at which stage we would have come full circle.

Because the process is so inclusive and participation from the public and practitioners alike are necessary, one understands the lengthy process. That notwithstanding, the short window of transactional certainty is a stumbling block in activity.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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What lies ahead for SA’s budget?


On 24 February 2021, Finance Minister Tito Mboweni will deliver the annual budget address shortly on the heels of the State of the Nation Address a week earlier by President Cyril Ramaphosa. Given the expected R700 billion budget shortfall for the current cycle, Minister Mboweni will be forced to make some drastic decisions around taxation. We consider some of the potential areas that he might look to below.

Wealth Taxes

For many years, there have been discussions around imposing a wealth tax in South Africa on a certain income bracket. Commentators have recently indicated that should such a wealth tax be imposed on persons with a net asset value higher than R3.2 million, the fiscus could expect as much as R56 billion to be recovered. Many people consider wealth taxes to be a double tax since South African tax residents are already subject to capital gains tax on the disposal of assets, as well as estate duty. Accordingly, there will be severe push-back from the already over-taxed higher income bracket. The imposition of such a wealth tax might also be premature, since the basis on which it is done as well as the collection mechanisms have not been considered in detail, which could lead to an administrative nightmare. Therefore, our view is that wealth taxes are currently not on the cards for 2021.

Increasing the VAT Rate

VAT is a consumption tax. With a subdued economy and many sectors of the said economy currently unable to fully operate, an increase in the VAT rate is unlikely to contribute significantly to the fiscus in the current year. There will also be considerable push-back from Unions and the general public should there be an increase in VAT rates, and we do not see this as a source of government revenue for 2021.

Limitation of Losses and Interest Deduction Restrictions

Both these matters were already highlighted during the previous Budget and Legislative Amendment Cycle. Presumably, since National Treasury had many other complex issues to deal with during 2020 (including COVID-19 relief mechanisms), these items did not receive the attention they should have during 2020. In our view, both these matters will result in legislative amendments in 2021.

Increase in CGT Rate

It is unlikely that an increase in the inclusion rate of capital gains tax (CGT) will contribute significantly to the fiscus — as such, we do not foresee any increases in this regard.

Solidarity Levy/Tax

In 1994, South African taxpayers were subject to a once-off transitional levy to accommodate for the increased expenditure from the changeover to a democratic country. Not since 1994 have we had another single event that has led to such a substantial outflow from the fiscus as has been the case with COVID-19. Although the implementation mechanisms and expected revenues from such a solidarity tax or once-off levy is uncertain, we would not be surprised at all come 24 February 2021 to see such a levy to accommodate for the budget shortfall.

The 2021 Budget Address will likely be the most challenging in South Africa’s recorded history, given the considerable budget shortfall that we face and the current subdued global economy. We wish Minister Mboweni and his colleagues at National Treasury all the best in their preparation for a very difficult task.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Taxpayers: Know your rights!


Since the introduction of the Tax Administration Act in 2011, which aimed to consolidate most of the administrative matters in tax acts, taxpayers have become ever more aware of their rights in dealing with the South African Revenue Service (SARS). There has also been a significant increase in the number of cases in the Tax Court (as well as in our High Courts) that relate not to substantive tax matters, but rather to the exercise of taxpayers’ rights. We briefly highlight below some of the rights that taxpayers have in terms of the Tax Administration Act, and which they may wish to enforce at some stage.

  • You are entitled to receive reasons for any assessment that SARS raises and any taxes it imposes. Therefore, SARS is not allowed to simply raise assessments without giving you (when called on in terms of the dispute resolution rules) a full understanding of their justification and their interpretation of the law, which underlies the specific matter.
  • SARS is not allowed to appoint a third party to deduct money from your account (for example, a bank) without providing you with the proper notice at least ten days in advance, as well as providing you with remedies to address the matter.
  • SARS is not entitled to divulge your information (except as required by law) to any third parties.
  • Provided that your returns were free of material deficiencies, SARS must pay interest on delayed VAT refunds. This is a matter that is often overlooked in practice since taxpayers are all too happy to receive the actual VAT amount – do not forget about your interest!
  • SARS must provide you with a tax clearance certificate within 21 business days after the submission of an application. More and more institutions require the issuance of tax clearance certificates for general business purposes.

Although taxpayers have many rights afforded to them, one often finds a practical challenge in exercising those rights. The legislation provides for relief in certain circumstances but does not prescribe a form and manner in which taxpayers must utilise that relief (for example, an application for a reduced assessment where there has been an undisputed factual error). Although the law provides for relief, the Act does not prescribe how that relief must be exercised.

This is one of the clear shortcomings within our system of tax administration and one hopes that in due course, National Treasury and the Minister of Finance will identify these fallibilities as a systemic issue within the administration of our tax system, in order to approach the Tax Ombud to make recommendations on how taxpayers can exercise their rights afforded to them daily.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Emigrated and selling your house? Beware of withholding taxes


Many South Africans who simultaneously emigrate and cease to be South African tax residents are faced with a situation where the sale of a fixed property has not been finalised by the time they cease to be tax residents. This may result in the unintended consequence of them becoming a non-resident seller of immovable property in South Africa.

In terms of South African tax laws, any purchaser who must pay any amount exceeding R2 million to any other person who is not a resident (or to any other person for, or on behalf of, that seller), is required to withhold an amount equal to 7,5% of the amount payable if the seller is a natural person (known as a withholding tax). This is mandated in respect of the disposal by the seller of any immovable property in the Republic. The withholding mechanism essentially acts as pre-payment in respect of any capital gains tax exposure in South Africa. A purchaser is personally liable if they know or should reasonably have known that the seller is a non-resident, which is often the case in scenarios such as described above. If the amount is in fact withheld, the purchaser must pay the amount to SARS before or on the date on which payment would have been made.

If an estate agent or conveyancer has assisted in the disposal of property, a purchaser will not be held personally liable if they were not notified of the seller’s non-resident status by that estate agent or conveyancer. If an estate agent or conveyancer should reasonably have known that the seller is a non-resident and fails to notify the purchaser, the failing estate agent or conveyancer is jointly and severally liable for the payment of the amount which the purchaser is required to withhold and pay to the Commissioner. Yet, this amount is limited to the sum of remuneration or other payment in respect of the services rendered in connection with the disposal of immovable property by the seller, or the registration of transfer, whichever applies.

An application may, however, be made for a directive that no amount be reduced or withheld by the purchaser if the actual liability of the seller in respect of tax, at the time of the disposal of the immovable property, is less than the amount arrived at by applying the percentage of 7,5%. To request a tax directive for a lower or zero rate of tax to be withheld, the seller must complete an NR03 form and submit it together with the offer to purchase, tax calculation and supporting documentation to or use one of the other submission methods described on the form.

South African taxpayers who plan on emigrating should actively manage this process to ensure that properties are disposed of before ceasing tax residency or ensure that they adhere to the requirements of withholding taxes.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE

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Can I compel my employees to get vaccinated?” & other questions you’ve been asking


2020 was a year that will always be remembered for a variety of reasons. Apart from the obvious invasion of COVID around the world, South Africa has also had somewhat of a rollercoaster ride of a year – from PPE controversies to the Jerusalema dance which acted as a unifying symbol for South Africans across the country.

By the end of 2020, a new sense of optimism seemed to surge as promising vaccines were unveiled by large pharmaceutical companies all keen on winning the race to have the first widely-available vaccine, which should signal the start of the end of the COVID-19 nightmare.

Naturally, many business owners are starting to think of returning to ‘business as usual’ once the COVID-19 vaccine becomes available, but it does start to prompt questions about vaccines and how ‘business as usual’ might be practically achieved.

Here are some questions you may be wondering about…

When will the vaccine be available?

The vaccine could realistically be widely available in the first quarter of 2021 (perhaps exclusively for those working in the Health Sector at first), but latest in the second quarter.

There are a few things that need to happen before then: The South African Health Products Regulatory Authority (SAHPRA) will need to authorise any vaccine, since unregistered medicine cannot legally be sold in South Africa, and the infrastructure needs to be built in order to safely roll out vaccination doses at large scale.

Will the vaccine itself be safe?

Vaccines generally take years to be developed, approved, and distributed – yet many promising COVID-19 vaccines have been developed in a much shorter time. This doesn’t mean, however, that COVID-19 vaccines will be any less safe – they have gone through the same stages that our known vaccines have gone through – which includes many tests evaluating its dangers and/or side-effects. None of the initial contenders provide any sign of danger.

Will the vaccine be optional?

Most likely. Unless the government decides to act on a provision made in the National Health Act to mandate national immunisation, you will probably be able to decide whether to receive the vaccine or not.

Can I compel my employees to get vaccinated?

Unless you have an express clause written into your employment contracts, you will not be able to compel your employees to be vaccinated when the vaccine arrives. You might be better off simply encouraging your workers to vaccinate rather than compelling them, while keeping to strict COVID-19 health protocols in the meantime.

When can we do away with facemasks in the office?

Right now, the law is still clear – facemasks need to be worn out in public and at work. This regulation may remain for as long as the state of disaster lasts. Facemasks will continue to protect and prevent the spread of Coronavirus and should not be wished away too soon, especially while no vaccine is available to the general public yet or many employees are still unvaccinated.

When can we expect to return to ‘business as usual’?

Trends right across the world seem to be showing that COVID-19 has had an immense impact in changing the way people think about work and the office space. If anything, ‘business as usual’ may be something that you’d want to avoid, since innovation and developments have shown that traditional business practices may well not be the most productive anymore. Instead of focussing on returning to ‘business as usual’, why not use the time left (before a vaccine becomes available) to see how you can improve your business practices, implement newer, more effective technologies and practices, and differentiate your business from those around you?


This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE

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6 Implementations to eliminate most cyber threats to your business


As a business owner in the digital age, one of the best things that you can do to gear yourself for the future of your industry is to learn how to protect your business and its interests from cyber threats that could lead to damages on a large scale.

One of the most frequent minor inconveniences we face in the modern age is waiting for a program to update before we can use it again. You might find it frustrating if your anti-virus program wants to perform an update every other day, but these updates are vital to your continued safety.

These updates are necessary as every moment that goes by is another moment in which a cybercriminal is attempting to exploit vulnerabilities in the digital universe. In fact, everything we know about cybersecurity right now is already outdated. Do not let it come as a shock or induce panic, though, as there are many practices/steps that you can implement to essentially eliminate all cyber-threats to yourself and your businesses.

  1. Start with yourself

The best leaders learn before they teach others to follow. This is not to say that you need to learn everything there is to know about cyberinfrastructure and cybersecurity before you start speaking to your employees about it. But the only way that those in your employ will trust you enough to listen and take to heart what you say, is if you lead by example.

Take time to familiarise yourself with cyber threats to your business. As a business leader, you are best equipped to identify the areas of your business most susceptible to cyberattacks. Once you have identified the most valuable information your business possesses, you can ramp up your security measures in the right areas to repel or prevent attacks against your company.

  1. Focus on re-learning

As people who have grown up in a society where technology has grown in leaps and bounds over the years, we must not be as naïve as to think that what we knew 10 years ago is still as valid today. Cybersecurity, from now until the indistinct future where we transcend the need for a digital world (which will not be anytime soon), will constantly need to be revised, unlearnt, and re-learnt.

Therefore, from the outset, it is necessary to take a systematic approach to cyber education that constantly revises its practices and implements new safety measures against the multiplicity of threats out there.

  1. Know about the array of cyberthreats out there 

To be best equipped for a cyberattack, you need to be aware of the various avenues for attack that exist and how these points of attack may present themselves to your business.

  • Web-based attacks 

Web-based attacks make up the largest proportion of all cyberattacks (49%). These attacks are conducted while you are browsing the web and can take a variety of forms: from clicking a hyperlink to a malicious website, to enabling malicious web-scripts, to inadvertently installing malware.

  • Phishing 

The second largest proportion of cyberattacks (43%) is phishing attacks, which often starts over email. Phishing is a method of cyberattack by which cybercriminals entice you to divulge sensitive information while purporting to be reputable sources.

  • Spoofing 

Spoofing is when someone or something pretends to be something else in an attempt to gain a victim’s confidence, get access to a system, steal data, or spread malware.

  • Malware 

Malware is a kind of malicious software that compromises a network/device/system. These include, but are not limited to, adware, viruses, trojan horses, and spyware.

  1. Put the infrastructure in place to minimise your risk

As cyberattacks become more sophisticated, so do anti-virus programs (and other cybersecurity tools). Make sure you have the kind of infrastructure in place to maximise your security. Here are some considerations for improving your cybersecurity:

  • Implementing firewalls between datapoints
  • Investing in reputable (paid) anti-virus/anti-malware solution
  • Encrypting the data you store on your servers
  • Installing a Virtual Private Network (VPN) on your devices
  1. Teach your staff cyber (street) smarts

The vast majority of cyberattacks require at least some kind of human interaction for it to be successful. While your infrastructure can do a lot to minimise risk, it can never eradicate it. That is why you need to invest in continuous staff training. Make sure to include cybersecurity training as part of your onboarding processes, while continually helping your staff make the best decisions while working online.

Cybersecurity smarts are not only worthwhile in the office, but they are also becoming a necessity outside of the office. Promoting cyber-security as a habit could go a long way to protecting your employees and company no matter where they are.

  1. Test your security

One tactic that many companies have been using to assess their risk of cyberattacks is that of co-ordinating mock security breaches in which employees are targeted with a cyber ‘threat’, which demands a response from them. Those who fail the test must be alerted to the real damages that could have been borne from threats to security and what the consequences of their actions may have been if there was a real security threat. Although it may seem a little drastic, it could very well serve as a much needed wake-up call for those who are naïve in their online activities.


This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE

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Auditor’s responsibilities relating to fraud – Part 1


Jeffrey Robinson, an international expert on organised crime and fraud, said: “Fraud has become pandemic around the world and if fraud were a disease, political leaders of all our nations would have to declare a global health emergency!” 


Hayley Barker Hoogwerf 

In a recent webcast presented by Mario Fazekas, a renowned certified fraud examiner, it was noted that the fraud pandemic is only going to get worse with the Covid-19 pandemic. The webcast provided an overview of the auditor’s responsibilities relating to fraud using International Standard on Auditing 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements (ISA 240), as the basis.

Responsibility for the prevention and detection of fraud 

When we trace the history of auditing, we find that in the early 1900s, fraud detection was one of the primary objectives of the audit. However, this objective became too onerous and from the 1920s, auditors no longer assumed the responsibility to detect fraud. Since then, audit has never reinstated the primary objective of detecting fraud. This may well be a root cause of the expectation gap that has arisen over the years with respect to the auditor’s responsibility to detect fraud. Between 1960 and 1980, audits were performed in accordance with Generally Accepted Auditing Standards (GAAS) where the focus shifted to the risks of material misstatement and the responses thereto, and these requirements remain to this day.

For the auditor to truly add value to the client and enhance the chances of the auditor identifying fraud, the auditor needs to understand the characteristics of fraud and perform the audit with an appropriately sceptical mind-set.

Characteristics of fraud 

ISA 240 states that misstatements in the financial statements can arise from either fraud or error, with the distinguishing factor being intent. Experience has shown that fraud is often overlooked. Auditors may identify an anomaly, for example an error or disparity between different sources of information that may be indicative of fraud, but do not apply the appropriate level of professional scepticism to the facts presented and fail to take the identified anomaly further in looking for evidence of intent. Such evidence may include alterations of documents, concealment or destruction of evidence, obstruction of justice, a pattern of conduct in terms of repetition of certain behaviour, personal gain as evidenced by lifestyle, and false statements.

The standard indicates an auditor conducting an audit in accordance with the ISAs is responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. This requirement focuses the auditor’s attention on fraud that causes a material misstatement in the financial statements. The response of some auditors to anomalies is that the amounts are not material and are therefore not investigated further. This may well be an area where auditors are going wrong. Owing to the nature of fraud, auditors should be cognisant of qualitative materiality when identifying fraud risk factors and when assessing identified anomalies, rather than purely focusing on quantitative materiality.

The identification of an anomaly in the audit environment can be equated to a visit to the doctor where the doctor identifies an anomaly. Like the auditor, the doctor has certain choices, namely to ignore the identified anomaly or to investigate it further. The doctor may find a minuscule spot of cancer and therefore not to report this to the patient because he or she does not want to cause unnecessary concern, or report the finding to the patient to provide them with the opportunity to take the necessary responsive action.

Fraud is like a cancer and if left, the problem does not go away but rather grows. Experience has shown that perpetrators of fraud start out committing small acts of fraud to test the system, then expand on these fraudulent activities once they realise it has gone undetected and such acts often result in significant financial loss to the entity. To prevent significant financial loss, it is imperative for the anomaly to be nipped in the bud at the early stages of the fraud − in the same way that a doctor would want the cancer to be eliminated before it spreads.

Auditors are therefore encouraged to report all identified errors or fraud risk factors to management regardless of how small they may be, in order to empower management to perform the necessary investigations and take any necessary corrective and/or preventive action.

The Association of Certified Fraud Examiners have identified five main categories of financial statement fraud schemes in their Fraud Tree:  

  • Timing differences, where the accounting period is kept open longer than it should and revenue ‘stolen’ from other reporting periods; 
  • Fictitious revenue by way of fictitious transactions being created; 
  • Concealed liabilities and expenses; 
  • Improper asset valuation, where the entity records assets at a higher value than the true valuations or reflects more assets than they actually have; and 
  • Improper disclosures where for example related party transactions are not disclosed or incomplete disclosure where management hides damaging transactions or events that occurred. 

The application and other explanatory material of ISA 240 contains an extensive list of risk factors relating to misstatements arising from fraudulent financial reporting that are related to the categories of incentives/pressure, opportunity and attitude/rationalisation that auditors should be alert to when performing an audit.

Professional scepticism 

Sam Antar, former Crazy Eddie CFO, former CPA and convicted felon, said that “As a criminal, I feared two things, scepticism and cynicism.”

A sceptical mind-set has the following characteristics:

  • A questioning mind-set, described as a disposition to inquiry with some sense of doubt; 
  • A suspension of (pre-) judgement where the auditor withholds judgement until appropriate evidence is obtained; 
  • A search for knowledge where the auditor has a desire to investigate beyond the obvious with a desire to corroborate audit evidence obtained; 
  • An interpersonal understanding, recognising that people’s motivations and perceptions can lead them to provide biased or misleading information, including lying, cheating and stealing, including by CEOs and CFOs; 
  • The self-esteem and the self-confidence to resist persuasion and to challenge assumptions or conclusions and consult with parties other than management if they are not providing the required information; and 
  • Autonomy, where the auditor has self-direction, moral independence, and conviction to decide for him or herself rather than accepting the claims of others at face value. 

Auditor scepticism starts with a person’s competence, including knowledge and skills. From this comes attitude or mind-set. Auditors must assume neither honesty nor dishonesty of their clients and be neutral in recognising the possibility of material misstatement due to fraud. Based on the competence of the auditor and the auditor’s professional scepticism, the auditor will decide how to act. Experience shows that most auditors have the necessary attributes, in that they have received the necessary training and therefore know what they should do. The attitude or mind-set is where auditors are going wrong in that auditors are overly concerned with their clients’ reactions to the auditors’ actions.

In concluding 

Antar also said: “Don’t trust, just verify, verify, verify. The inclination to trust and the presumption of innocence gives the fraudsters the initial benefit of any doubt while they are free to plan and execute their crimes.”

Professional scepticism and cynicism are key for auditors to positively contribute to detecting and therefore combating fraud. To succeed in adding value in identifying fraud, auditors must have a questioning mind and keep on asking questions until they are satisfied that they have the answers. 

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE

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The role of your child’s guardian


Choosing a guardian for your children is a huge decision to make and takes careful consideration.

If you have minor children, it is always advisable to nominate a guardian in your will who will love and care for your children if you are no longer around. Choosing a guardian for your children is a huge decision to make and takes careful consideration. Let’s have a closer look at the role and responsibility of a legal guardian.

What is a legal guardian?

A legal guardian is a person that you nominate in your will to take over the care of your child in the event that you pass away. Where you are married and your child has two natural guardians (i.e. you and your spouse), your legal guardian would only assume responsibility when both you and your spouse pass simultaneously. If you are the sole guardian of your child, the legal guardian that you appoint would assume responsibility in the event of your death. As a parent of a minor child, the Children’s Act makes provision for you to nominate a legal guardian in your will although it is important to remember that the nominated guardian must expressly accept the position if and when the time arises. Upon being appointed, a guardian is vested with the care of the child and acquires full parental responsibilities and rights upon acceptance of the appointment.

How does it differ from a godparent?

A guardian and a godparent perform completely different roles. While a guardian is a legal appointment in terms of the Children’s Act which comes with long-term responsibilities, a godparent has no legal standing and is generally considered to fulfil a spiritual role in the child’s life. That said, you are able to appoint your child’s godparent as their legal guardian in terms of your will.

Who can be appointed as a legal guardian?

A legal guardian of a child should be a fit and proper person, responsible, and a trusted friend or family member. The person you appoint should be someone you trust to effectively step into your shoes and take over the parenting of your child in every aspect. It is important to give careful consideration as to who would be best to care for your child, and who you can rely on to create a loving and holistic environment that is conducive to the child’s best interests. When choosing a guardian, give thought to their cultural background,  value system, religious beliefs, where they live, as well as their financial stability, as you will ideally want to nominate someone with a common set of morals and principles, and who is financially sound.

Can you appoint more than one guardian?

You may appoint two or more legal guardians in your will, although this can give rise to complications if the nominated guardians do not live together. Ideally, nominate a guardian in your will and then consider appointing an alternative guardian in case the nominated guardian passes away. Bear in mind that circumstances and relationships change over time, so be sure to review your will regularly to determine whether your nominated guardian is still the person you would want to care for your child.

Is a legal guardian remunerated for administering the minor’s estate?

Yes, a legal guardian is entitled to be paid for administering your child’s estate. You can set out the details of such remuneration in your will; alternatively, the guardian can be paid in accordance with the tariff set by the Master of the High Court.

What duties does a legal guardian perform?

The legal guardian takes over full parental rights and responsibilities of your child. The guardian must administer any property inherited by your minor child until they reach age 18, bearing in mind that you may stipulate a later age of maturity in terms of your will. The legal guardian will make all decisions regarding your child including lodging, schooling, extra-mural activities, pets, travel and vocational guidance. The guardian is also responsible for assisting or representing the minor child in administrative, contractual and/or legal matters until they reach maturity.

Does a legal guardian have financial control over the child’s inheritance?

If you have not set up a testamentary trust in your will, all funds bequeathed to your child will be payable to the guardian where you will expressly state that they can manage the funds on behalf of your minor child and where adequate security is provided. If your will is silent on this matter, any funds bequeathed to your child will need to be paid over to the Guardian’s Fund and will then be managed by the state. However, no guardian can sell or mortgage any immovable property belonging to the minor unless permission has been granted by the High Court, keeping in mind that the court will also act in the best interests of the child. Ideally, your will should make provision for a testamentary trust which comes into effect in the event of your death. All assets intended for your minor child should be bequeathed to the trust where they will remain in safe-keeping and be managed by the trustees nominated in your will.

Can the guardian also be a trustee?

Yes, you are able to appoint your child’s guardian as a trustee to the testamentary trust who will then be in a position to directly represent your child at trust meetings. In addition to the guardian, you may want to consider appointing a close friend or confidante as well as an independent, professional trustee, with three trustees being the optimal number for practical purposes. Keep in mind that one of the trustees’ most important functions is to manage and invest the trust assets in your child’s best interests, so be sure to appoint trustees who have sound financial acumen.

Will my child have any say?

Yes, the legislation makes it clear that the child’s views must be taken into account by the guardian depending on the age, maturity and stage of development of the child. While there is no set age at which a child can start making their own decisions, as they get older and more mature their wishes should be taken into account.

What happens if no guardian is appointed?

It is important to remember that the high court is the upper guardian of all children. If you do not appoint a guardian for your minor child in your will, a family member or friend would need to apply to the court to be appointed as the child’s guardian. This is a huge emotional and financial burden to place on one’s surviving family and friends, not to mention the minor child.

Will the guardian have enough money to care for my child?

Ensuring that your child is adequately provided for is your responsibility and this exercise should be undertaken in the financial planning process. It is unfair to nominate someone to the role of guardian without ensuring that there is sufficient liquidity in your estate to provide for your child until they reach at least age 18. Bear in mind that the person you nominate as guardian in your will must expressly accept the position. If you have not made adequate financial provision for your child and your guardian is not in a financial position to assume guardianship, they may refuse to accept the nomination. When making plans to provide for your child if you are no longer around, consider taking out a life policy with sufficient cover to provide for your child’s future needs, including their living expenses and education.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE

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Choose your trustees carefully


Many people who agree to take on the role of trustee are not fully aware of their duties and obligations, nor the extent to which they can personally be held liable.

When setting up your trust, whether through a trust deed (as in the case of an inter vivos trust) or through your will (in the case of a testamentary trust), you are required to appoint trustees to administer the assets of the trust. Selecting the most appropriate people to administer the trust assets for the benefit of its beneficiaries is important and is not a decision to be taken lightly.

Your trustees will have a fiduciary duty to look after the assets of the trust and will be required to exercise care and objectivity when performing their functions. Similar to managers of a company, your trustees are duty-bound in terms of the Trust Property Control Act to be guardians of the trust’s assets and to manage them as mandated in the trust deed.

Many people who agree to take on the role of trustee are not fully aware of their duties and obligations, nor the extent to which they can personally be held liable. Let’s have a closer look at the duties and responsibilities of trustees.

Appointing trustees

When setting up a living or inter vivos trust, the trust deed is your trust instrument and would appoint your trustees. As the trust founder, you would effectively enter into an agreement with the trustees in order to give effect to the trust. Where you set up a testamentary trust, your will becomes the trust instrument through which your trustees are appointed. Whether appointed to an inter vivos or testamentary trust, the first job of the trustees is to lodge the trust deed with the Master of the High Court and ensure that they are granted authority to act before acting or transacting on behalf of the trust. A trustee only has authority to act on behalf of the trust once the Master has issued the letters of authority. Bear in mind that where a trustee acts prior to being formally appointed, such action is void and cannot be subsequently ratified. When entering into transactions with a trust, it is therefore important to establish that the trustees have been formally appointed and have contractual capacity.

The independent trustee

From a governance perspective, it is always advisable to appoint an odd number of trustees to administer your trust, with three being the optimal number. Bear in mind that having too many trustees can be highly impractical especially when it comes to obtaining signatures, co-ordinating meetings and making decisions. Although not a legal requirement, appointing an independent trustee has become common practice in that it ensures a degree of objectivity in the management of the trust assets. In March 2017, the Master issued a directive to the effect that where South African trusts meet certain criteria, they are required to appoint an independent trustee to ensure that the trust is administered legally.

Specifically, trusts which have the power to contract with independent third parties, in which all the trustees are beneficiaries, and where all the beneficiaries are related, are required to appoint an independent trustee. While not required to be a professional person, it makes sense to appoint an independent trustee who specialises in fiduciary law or who has a sound understanding of trusts and the legislation pertaining to trusts. When appointing a professional trustee, bear in mind that they are entitled to be paid a fee as set out in the trust deed or as agreed to by the trustees.

Taking control of trust assets

To ensure the validity of a trust, the trust donor must relinquish control of the trust assets to the trustees. As such, one of the first functions of the trustees is to identify the various assets of the trust, prepare an inventory of assets, and then take control of them. In the event of immoveable property such as a holiday home or farm, the property must be duly registered in the name of the trust. The trustees are also required to set up a bank account in the trust’s name in which money received on behalf of the trust should be held. Any shares or investments should also be registered in the name of the trust. In the case of moveable property such as artwork or jewellery, the trustees have an obligation to make sure it is secured and appropriately insured.

Duties of trustee

The trustees are expected to exercise their discretion independently and without the influence of any other person. As such, their ability to act in good faith is paramount, and any conflict of interest should be avoided. Other than reasonable remuneration for their services, no trustee should stand to gain personally from the trust in their capacity as trustee. Trustees should also bear in mind that they can be held personally liable for any losses suffered by the trust as a result of their negligence (ordinary or gross) or intentional wrongdoing, and that their duty of care, diligence and skill is onerous.

A trust is not recognised as a separate legal person in South Africa, and it is therefore the trustees in their official capacity that can be held liable. Bear in mind that a clause in a trust deed which indemnifies a trustee against a breach of their duty is ineffective because the fiduciary duty of the trustee is paramount and cannot be contracted out of.

The powers of the trustees are set out in the trust deed which commonly grants the trustees fairly wide powers in the administration of the trust, including buying and selling trust property, making decisions regarding distributions to the beneficiaries, entering into contracts, opening bank accounts and making investment decisions.

When it comes to investing the capital of the trust, the trustees need to make prudent investment decisions in the best interests of the beneficiaries to ensure that the trust capital is protected against inflation while at the same time not exposed to unnecessary investment risks. This can be a difficult balancing act for trustees and may require them to seek independent investment advice, bearing in mind that trustees can be held liable if it is found that the trust’s money was not prudently invested.

In managing the trust’s assets, the trustees are also required to keep accurate records which must be kept for a period of five years. Although there is no requirement for trusts to be audited, the trustees are required to prepare annual financial statements and to submit the trust’s tax returns timeously. However, trustees should bear in mind that they remain at all times accountable to the Master who is able to request at any time a full account of the administration of the trust. He also has the power to request any document, account, statement or record in relation to the trust. The duties of the trustees also extend to ensuring that the trust complies with all related legislation, including the Income Tax Act, Tax Administration Act, the Banks Act amongst others.

From an administrative perspective, the trustees are required to keep the trust deed updated at all times, record all decision-making, prepare agendas and minutes of all meetings, draft resolutions, and facilitate regular trustee meetings.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE

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