Donations tax: what to know before gifting assets to family

November 11, 2026

Many South Africans want to help their children buy a first home, transfer a holiday house to the next generation, or move assets into a family trust during their lifetime. These are generous and often sensible decisions, but they can have tax consequences. Giving assets away is not tax-neutral in South Africa.

Donations tax is designed to stop people avoiding estate duty by giving away their wealth before death. It is levied on the donor, and it can apply to cash, property, shares, loans that are written off and assets sold below market value. A gift can also trigger capital gains tax for the donor at the same time.

The rules have recently changed. Following the February 2026 Budget, SARS lists the annual exemption for individuals as R150,000, up from the R100,000 that had applied for many years. Treasury also proposed that the exemption for donations between spouses should apply only where the recipient spouse is a South African tax resident. This article explains how donations tax works now and how to plan family gifts sensibly.

What is donations tax?

Donations tax is governed by sections 54 to 64 of the Income Tax Act 58 of 1962. It applies to the value of any property disposed of under a donation by a South African tax resident. A “donation” is a gratuitous disposal of property, which includes the gratuitous waiver or renunciation of a right. The donor is liable for the tax. Non-residents are generally not subject to donations tax.

“Property” is defined widely. It includes money, immovable property, shares, vehicles, investments and rights. Writing off a loan owed by a family member is a donation of the amount written off.

Rates

Donations tax is charged at:

20% on the value of property donated, where the donor’s cumulative taxable donations since 1 March 2018 do not exceed R30 million; and
25% on the portion of cumulative taxable donations that exceeds R30 million.

The R30 million threshold is cumulative, so a donor must keep a record of all taxable donations made since that date.

Exemptions

The most important exemptions are:

The annual exemption for individuals. SARS currently lists the first R150,000 of donations made by a natural person in each tax year as exempt. The exemption does not roll over. If you do not use it in one year, it is lost.
Casual gifts by companies and trusts. Donors that are not natural persons may make casual gifts up to a limited annual amount, which SARS currently lists as R20,000.
Donations between spouses. Donations to a spouse are exempt. SARS now indicates that this applies where the recipient spouse is a South African tax resident. Couples where one spouse has emigrated or is planning to should take advice before transferring assets between them. Our article on ceasing tax residency explains the wider context.
Donations to approved public benefit organisations, and donations between companies in the same South African group, subject to conditions.
Donations that take effect on death, such as bequests in a will. These fall within estate duty rather than donations tax.
Bona fide maintenance obligations, such as supporting a minor child, are generally not treated as donations.

Sales below market value

Selling an asset to a family member for less than it is worth can be treated as a donation. Under section 58, where property is disposed of for consideration that SARS considers inadequate, the difference between the market value and the price may be deemed a donation. Selling a property worth R3 million to your daughter for R1 million could therefore expose you to donations tax on R2 million, less any available exemption.

Capital gains tax on a donation

When you donate an asset, you are treated for capital gains tax purposes as having disposed of it at market value. If the asset has grown in value since you acquired it, you may owe capital gains tax on the gain, in addition to donations tax on the full value. The recipient takes the asset at that market value as its base cost. Both taxes must be considered together when deciding whether to give away an asset during your lifetime.

Income from donated assets

Donations can also affect income tax. Section 7 of the Income Tax Act contains anti-avoidance rules that can attribute income back to the donor. For example, income earned from money donated by a parent to a minor child may be taxed in the parent’s hands. Similar rules apply to certain donations to spouses and to trusts.

Donations to trusts and section 7C

Families often move assets into a trust for estate planning. A donation of an asset to a trust attracts donations tax in the ordinary way. Selling the asset to the trust on an interest-free or low-interest loan account avoids an immediate donation, but section 7C treats the interest forgone as an annual donation by the lender. The annual exemption can absorb some or all of this, but the numbers must be checked each year. See our article on using trusts in business structures.

Paying and declaring

Donations tax must generally be paid to SARS by the end of the month following the month in which the donation takes effect, and the donation must be declared on the prescribed form (IT144). If the donor does not pay on time, the donor and the recipient can be held jointly and severally liable for the tax. Late payment attracts penalties and interest.

Keep a written donation agreement for significant gifts, together with valuations, so that the value and date of the donation can be proved if SARS asks.

Donations tax and estate duty

Lifetime giving can reduce the value of your estate, and therefore the estate duty payable on death. Estate duty is charged at the same 20% and 25% rates, with an abatement for the estate. Making use of the annual exemption every year is one of the simplest ways to move value out of your estate over time without tax. Larger gifts require careful comparison of the donations tax, capital gains tax and estate duty outcomes. Our article on estate duty and planning for it explains how the two taxes interact.

Checklist before making a gift

Confirm whether you are a South African tax resident.
Value the asset at the date of donation.
Check whether an exemption applies, including the annual exemption and the spouse exemption.
Calculate any capital gains tax on the deemed disposal.
Consider whether income from the asset will be attributed back to you.
Record the donation in a written agreement.
Declare and pay any donations tax by the end of the following month.
Keep a cumulative record of taxable donations.
Update your will and estate plan to reflect the gift.

How O’Reilly Law can help

We advise individuals and families on donations, lifetime transfers of property and shares, and loans and donations to trusts. We draft donation agreements, coordinate with your accountant or tax adviser on the tax outcome, and align lifetime gifts with your will and estate plan.

Contact us before you make a significant gift to family.

This article is general information and not legal or tax advice. Correct as at November 2026.