Archive for month: July, 2026

In 2026, Gen Z and Millennials are beginning to take their place as the dominant purchasing generations. It’s a significant moment as these two generations do things differently to those that came before. Millennials established the trend, choosing to focus on values-led purchasing, driven by a preference for transparency, and a willingness to hold brands to account. Gen Z has taken it further still, treating consumption as activism.

According to McKinsey & Company, nearly 70 percent of respondents say that a brand’s social and ethical values directly influence their purchasing decisions. This deepening sense that spending choices carry moral weight, a trend known as “charitable identity”, has created a consumer bloc unlike any that has come before it. For small business owners and entrepreneurs, understanding this shift is about to become essential for future earnings.

Identity is the new loyalty

For older generations, brand loyalty was largely built on reliability and price. For younger consumers, the framework is entirely different: brands are worn like values on a sleeve. Research from the 2024 Edelman Trust Barometer confirms that Gen Z uses brand affiliation as a form of social signalling. It’s a way of communicating who they are, and who they are not. This means that choosing to buy from a brand is less about the product and more about the statement. A clothing label with verified ethical supply chains, a bank that invests in community lending, or a coffee company that pays fair-trade premiums: these are all brands that allow the purchaser to feel that their money is doing something meaningful. In this sense, purpose-driven brands have become a form of charitable giving. The consumer simultaneously acquires a product and signals support for a cause.

Where ethical business meets charitable identity

Perhaps the most nuanced dimension of this trend is the ever-blurring line between consumption and philanthropy. For many younger consumers, donating to a cause and buying from a purpose-aligned brand are not distinct activities. They occupy the same emotional register: both feel like acts of conviction.

This overlap between consumption and charitable intent is transforming the way small businesses can position themselves: a clear social mission is also a business goal. If you have not made space in your annual budgets for your social mission, this must be rectified as soon as possible. You need to decide just what you stand for, and how much you can afford to invest in this aspect of your business. As your accountants, we can help you with this.

What this means for Mandela Day

Getting involved in initiatives like Mandela Day is no longer a purely philanthropic choice. And, interestingly, small businesses have an advantage over big ones. While a large corporation can sponsor a global cause at arm’s length, a small business can muck in at a local level. From supporting the local school’s sports team, volunteering at a food bank, or committing a percentage of monthly sales to a neighbourhood cause, it’s all about making your values visible to your immediate community.

Regular and authentic charitable activity generates word-of-mouth referrals that no advertising budget can replicate. It earns coverage in local and trade media, and produces social media content that resonates precisely because it is real. It also builds internal loyalty, as employees who feel proud of where they work are more motivated and less likely to leave.

The key piece, however, is alignment. Charitable activity that feels disconnected from your business’s identity will stick out to a generation trained to detect inauthenticity at a glance. A legal firm that mentors disadvantaged youth, an accountancy practice that runs free financial literacy workshops, a café that donates unsold food to a local shelter: these are acts of giving that simultaneously tell a coherent story about who you are and what you stand for.

The practical formula is straightforward: choose causes your team genuinely cares about, build long-term partnerships rather than one-off gestures, communicate them consistently across your channels, and track the outcome not only in goodwill but in customer retention and referral rates. What you choose to do for Mandela Day is a valuable part of your brand, not just an excuse to get out of the office.

When Mr and Mrs J set up a Type-A special trust for their eldest son, who is intellectually challenged, their intention was to make certain there would always be sufficient financial resources for his best care, both during and beyond their lifetimes. A special trust was recommended by a professional advisor and with good reason: Type-A special trusts are created “solely for the benefit of a person with a mental or physical disability.”

However, as Mr and Mrs J found out, while Type-A special trusts have very compelling tax benefits, there are also substantial tax limitations. Fully understanding these within the unique personal context of the ultimate beneficiary is essential to ensuring the trust objectives are met over the long-term. And that means relying on specialist and individualised tax advice when considering a trust arrangement of any kind.

Why set up a trust?

A correctly structured trust can be a powerful financial planning tool for business and property owners, wealthy individuals, or families. It can help manage succession, protect assets, provide for children or dependents, navigate estate planning issues and pass on wealth responsibly.

What is crucial is setting up the right structure for the objectives of the particular trust and understanding the consequences – and particularly the tax consequences – of the decisions made.

Which trust is best for you?

There are many different types of trusts in South Africa. For example, an inter vivos (living or family) trust, is created during your lifetime to hold assets such as property, business interests or investments, while a testamentary trust is created through a will (it only kicks in after your death) and is especially important where minor children are involved.

There are also vesting and discretionary trusts, and hybrid trusts that combine the two, as well as a range of specific application trusts like trading (business) trusts, charitable trusts or BEE trusts, to mention but a few.

What about special trusts?

For tax purposes, two types of special trusts are also recognised, the Type-A special trust is intended solely for a person with a mental or physical disability, as in our opening story, and the Type-B special trust created specifically for the benefit of relatives of a deceased person, provided at least one beneficiary is a minor on the last day of the trust’s year of assessment.

The trust types are not mutually exclusive. For example, a trust can technically be both a Type-A special trust and a vesting trust; or both a Type-B special trust and a discretionary trust.

However, the exact trust type really matters from a tax perspective, because Type-A and Type-B special trusts are not taxed in the same way, and both are taxed differently to normal trusts. This should be carefully considered before establishing a trust, and then disclosed when completing the mandatory annual tax returns.

How is income for normal trusts taxed?

In terms of what is called the “conduit principle”, trust income or capital gains may be taxed in the hands of the trust or the beneficiaries, depending on when that income or capital gain vests.

Where the trust itself is taxed, it is taxed at a flat rate of 45%. Beneficiaries are taxed at their personal tax rate on a sliding scale from 18% to 45% and also benefit from various tax rebates. SARS taxes a trust’s capital gains depending on whether the gains are retained in the trust or vested to a beneficiary in the same year of assessment. Normal trusts face an effective Capital Gains Tax (CGT) rate of 36% (calculated from an inclusion rate of 80%, which is then taxed at the flat 45% income tax).

Beneficiaries that are individual taxpayers have a maximum effective CGT rate of 18% (calculated from an inclusion rate of 40%) and also qualify for rebates such as the R50,000 annual CGT exclusion, the R3-million primary residence CGT exclusion, and disregarded CGT gains on personal-use assets or compensation for personal injury, illness or defamation.

The special case of Type-A special trusts

Type-A special trusts, on the other hand, are taxed using individual income tax brackets on a progressive sliding scale from 18% to 45%.

Their capital gains inclusion rate is 40%, making their maximum effective CGT rate 18%, lower than for normal trusts and the same as for natural persons. They also qualify for CGT rebates that apply to individuals as listed above. Relief from donations tax on interest-free or low-interest loans to Type-A special trusts also applies.

However, there are some important tax limitations. Type-A special trusts do not qualify for medical tax credits, primary tax rebates, or the annual interest exemption available to natural persons. A Type-A special trust may vest income in a qualifying beneficiary so that the income is taxed in that individual’s hands, enabling the individual to use their own rebates, medical credits and interest exemption.

Bottom line: it’s complicated, so get professional tax advice based on your specific circumstances.

Our tax advice can make all the difference

Whether you’re considering a special trust, an inter vivos trust, or any other structure, the differences in how income and capital gains are taxed, and what tax rebates are allowed, can have a significant impact on the real-world benefit delivered to the trust beneficiaries. The right choice depends entirely on the trust’s objectives, your unique circumstances, and a careful analysis of possible tax consequences.