Death and taxes: one death, three taxpayers

When someone dies, their tax affairs do not stop. They split. The South African Revenue Service (SARS) now deals with three taxpayers, each with its own period and its own rules. This article sets out who is taxed on what, the capital gains tax (CGT) amounts that changed from 1 March 2026, and four stories that show where the tax falls.

One death, three taxpayers

Ask of every amount: to whom did it accrue? The answer puts it with one of three taxpayers.

• The deceased, up to and including the date of death. Their tax year ends on the day they die. The final return carries all their income to that date, any lump sums deemed to accrue immediately before death, and the deemed sale of what they owned.
• The deceased estate, after death. It is a separate taxpayer for the income it earns and the gains it makes while it holds the assets.
  • It is taxed like an individual, but gets no rebates, cannot use an assessed loss the deceased had, and is not a provisional taxpayer.
  • It does get the interest exemption and the annual CGT exclusion, and the primary residence exclusion, generally in full if the home is sold within two years of death (after that, it is reduced).
• The heir, once the asset passes. An asset passes from the estate to the heir on the earlier of its transfer and the date the liquidation and distribution account becomes final.
  • The heir takes over the estate's base cost, normally the market value at death. Where the spouse roll-over applies, the spouse takes over the deceased's own base cost.

What changed from 1 March 2026

Three CGT amounts went up in Budget 2026. The Income Tax Act lets an amount the Minister announces in the Budget apply from the date announced, for 12 months, provided Parliament passes the law within that time. These three apply from 1 March 2026. Parliament has not yet enacted them: the 2026 Rates and Monetary Amounts Bill was introduced on 21 October 2026. For a death before 1 March 2026, the deceased's final return uses the old amounts.

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• The exclusion in the year of death: R440 000, for deaths on or after 1 March 2026 (R300 000 for earlier deaths). It applies in full, instead of the annual exclusion, and is not apportioned to the part of the year the person lived.
  • A common worked example gets this wrong by apportioning it.
• The primary residence exclusion: R3 000 000 for disposals on or after 1 March 2026, including the deemed sale on a death on or after that date (it was R2 000 000). It is not apportioned in the year of death either.
• The annual exclusion: R50 000 for years of assessment from 1 March 2026 (it was R40 000). The deceased estate gets it too.

Four stories follow. The people and businesses in them are fictitious, and the figures are illustrative.

The final return: Dr Mokoena's share portfolio

Dr Mokoena, a GP (general practitioner) aged 58, dies on 31 August 2026. She is married to Sipho out of community of property, and he is her only heir. Among her assets is a share portfolio she bought for R1 000 000, worth R2 500 000 on the day she died.

• Her tax year ends on the day she dies, so her final return covers 1 March to 31 August 2026.
• Everything she owns, with a few exceptions, is treated as sold at market value on that day, for income tax as well as CGT. The main exception is an asset that goes to a resident spouse.
• Her interest exemption is cut to the part of the year she lived: R23 800 x 184 / 365, about R12 000.
  • The 184 days run from 1 March to 31 August: 31 + 30 + 31 + 30 + 31 + 31.
  • R23 800 is the full exemption for a person under 65.
• The R440 000 exclusion for the year of death applies in full, because she died after 1 March 2026.
• A retirement fund lump sum paid because of her death is taxed in this same final return, as if she received it immediately before she died.

The numbers, if the shares do not roll over to Sipho

• Gain on the shares: R2 500 000 less R1 000 000 = R1 500 000.
• Less the exclusion for the year of death (deaths on or after 1 March 2026): R1 500 000 less R440 000 = R1 060 000. This assumes the shares are her only capital gain that year.
• Included in her taxable income at 40%: R1 060 000 x 40% = R424 000.

The twist: where Sipho lives

• If Sipho is a South African tax resident and the shares themselves pass to him, they roll over. No gain on the shares is taxed on Dr Mokoena's return, and Sipho takes over her R1 000 000 cost.
• If Sipho works in London and is not a South African tax resident, there is no roll-over. The R424 000 is added to Dr Mokoena's taxable income on her final return. There is no exception, not even for South African property.
• The roll-over also needs the shares themselves to reach Sipho. If the executor sells them and pays Sipho the cash, the roll-over is lost.

The point to keep. Leaving everything to your spouse only defers the CGT if your spouse is a South African tax resident and receives the asset itself.

The estate as a taxpayer: Farouk's flat and his property company

Farouk owns a flat he lets out and all the shares in Jacaranda Lane Properties (Pty) Ltd, which owns a commercial building. His daughter Zainab inherits both. The estate takes six months to wind up.

• The rent on the flat while the estate holds it, R10 000 a month for six months (R60 000), is the estate's income, not Farouk's and not Zainab's.
• Farouk's own tax, including the CGT on the deemed sale at death, is a debt of his estate and is deducted in working out estate duty. The estate's own tax on the rent is not.

The property company trap

The executor is asked to wind up Jacaranda Lane Properties inside the estate. The company bought the building for R1 000 000, funded by share capital or a loan from Farouk, and sells it for R5 000 000: a gain of R4 000 000. The first R1 000 000 paid out repays that capital or loan, so it is not a dividend.

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• Company CGT at an effective 21.6% (80% of the gain taxed at 27%): R4 000 000 x 21.6% = R864 000.
• Dividends tax at 20% on what is paid out: (R4 000 000 less R864 000) x 20%, about R627 000.
• Total: R864 000 plus about R627 000, about R1 491 000. That is 37.3% of the gain.

On top of that, the estate's capital loss on its shares in the company dies with the estate, unless the estate has capital gains of its own to set it against. If the shares go to Zainab first, she takes over the estate's cost, and the loss arises in her hands when the company is wound up, where she can use it against her own capital gains.

The point to keep. Do not liquidate a property company inside the estate without working the numbers: about 37.3% of the company's gain goes in tax, and the estate's loss is wasted unless the estate has capital gains of its own to set it against. Giving the heir the shares first keeps that loss usable. It does not remove the company's tax or the dividends tax: those still arise whenever the company is wound up.

Estate duty: Dr Naidoo's life policy

Dr Naidoo, a specialist, dies with assets of R16 000 000. Her debts, bond and estate costs come to R7 000 000. A life policy of R2 000 000 is paid straight to her daughter Anika, the named beneficiary.

• Estate duty is 20% of the dutiable amount up to R30 000 000 and 25% above it. The dutiable amount is the net value (the assets less the deductions the Act allows, such as debts and costs) less an abatement of R3 500 000.
• A South African life policy on your life, paid straight to a named beneficiary, is still counted for estate duty, unless one of the narrow exclusions applies. Dr Naidoo paid every premium and no exclusion applies, so the full R2 000 000 is part of the R16 000 000.
• The executor pays all the duty, but recovers Anika's share from her. Her share is worked on the net value, after debts and before the abatement. A common worked example gets this wrong by using the gross value.

The numbers, before the twist

• Net value: R16 000 000 less R7 000 000 = R9 000 000.
• Dutiable amount: R9 000 000 less the R3 500 000 abatement = R5 500 000.
• Estate duty at 20%: R5 500 000 x 20% = R1 100 000, split by the policy's share of the net value.
  • Anika: R2 000 000 / R9 000 000 x R1 100 000, about R244 000.
  • The rest of the estate: about R856 000.

The twist: Ravi's unused abatement

Ravi, Dr Naidoo's late husband, died in 2019 and left his whole estate to her outright. The deduction for what passes to a surviving spouse took his net value to nil, so his estate used none of its R3 500 000 abatement. Dr Naidoo's estate can therefore deduct up to R7 000 000: twice R3 500 000, less the nil Ravi used.

• Dutiable amount: R9 000 000 less the R7 000 000 abatement = R2 000 000.
• Estate duty at 20%: R2 000 000 x 20% = R400 000, split the same way.
  • Anika: R2 000 000 / R9 000 000 x R400 000, about R89 000.
  • The rest of the estate: about R311 000.

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To claim it, Dr Naidoo's executor needs Ravi's estate duty return or other evidence SARS accepts. Keep it.

Two more traps

• A buy and sell policy owned by a trust that is not yet a shareholder can leave the estate paying duty on the policy and on the shares.
• Where the estate has an accrual claim against the surviving spouse under the Matrimonial Property Act, that claim is deemed property, and it is often missed when bequests go to the children.

The point to keep. A South African life policy paid straight to your child still carries estate duty unless a narrow exclusion applies, and your child pays their share. And for a surviving spouse, the paperwork from the first death can be worth hundreds of thousands of rand.

Value-added tax (VAT) and closing out with SARS: Pieter's guesthouse

Pieter ran the Aloe Ridge Guesthouse as a sole proprietor, registered for VAT, with four staff. He also owned a holiday flat the family never let. His executor keeps the guesthouse running until it is sold.

• While the executor carries on or winds up the guesthouse, including selling its assets, the estate is treated as the VAT vendor. VAT carries on.
• The holiday flat the estate simply holds for the heirs is not an enterprise, so no VAT arises on it.
• If the estate starts a new business of its own, it registers on the normal rules: compulsory once taxable supplies pass, or are likely to pass, R2 300 000 in any 12 month period. SARS has applied this threshold from 1 April 2026, as announced in Budget 2026; the law that enacts it is still before Parliament.
• Payroll does not stop at death. The PAYE (pay as you earn), UIF (Unemployment Insurance Fund) and SDL (skills development levy) returns carry on, and there is a final EMP501 with IRP5s for the staff.

Closing out

• The estate duty return goes to SARS with the liquidation and distribution account. The Master of the High Court will not file the account until the duty is paid or secured.
• The deceased estate compliance letter from SARS comes last, only once every return is filed and everything is paid. Keep it and the liquidation and distribution account for good.

The point to keep. A sole proprietor's business does not leave the tax system when the owner dies. The estate steps in as the VAT vendor and the employer, and VAT and payroll carry on until the executor has sold or closed the business.

Where to start

In each story, the tax turned on a fact that can be checked early. Four checks settle a great deal.

• Tell SARS of the death early: the deceased's tax year has already ended.
• For each amount, ask to whom it accrued: the deceased, the estate or the heir.
• For each asset left to a spouse, check that the spouse is a South African tax resident and that the asset itself will reach them.
• For a surviving spouse, find the first spouse's estate duty return, and keep it.

We help executors and families work through these questions, from the final return to the deceased estate compliance letter. Book a free discovery call and we will talk it through with you.

This content is for educational purposes only and is not tax, legal or financial advice. The people and businesses in these stories are fictitious and the figures are illustrative; any resemblance to real people or businesses is coincidental. The figures apply to deaths on or after 1 March 2026, and the law can change. Speak to a qualified adviser before you act on your own situation.