We are excited to inform you that we have merged with the DLR Financial Group — a successful professional financial services provider in their own right. This newly combined business will, therefore, be one of the leading independent financial services providers in South Africa.

The merger of our groups has enhanced our value proposition, enabling us to design the solution for our clients, by offering an expanded suite of services.

At the Origin Group, we are committed to you. We listen before giving advice and provide a holistic, customised solution that will fit each individual client.

A holistic view of our client’s financial position is required. The merger of our groups has enhanced our value proposition, enabling us to design a unique solution for our clients by offering an expanded suite of services.

Origin Group is now in a unique position to provide hindsight (compliance services), insight (performance-oriented services), and foresight (strategic services). This sets the stage for innovation and game-changing performance for our clients.

Our aim is to build Origin Group into a well-respected and diversified organisation that is recognised for creating value. Origin is committed to providing a valuable service while addressing the challenges of creating, managing, and maintaining wealth. Wealth is always linked to accounting records, the administration of ownership structures, family constitutions, and maximising our asset values.

Our approach is to constantly assist our clients by improving our level of service to ultimately achieve our goal: living excellence, respected for creating value.

We have acquired years of expertise to ensure that the family and all their business structures can benefit from what we offer.

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 adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

Binding Class Rulings (BCR) are issued in response to applications by a specific class of taxpayers (usually persons that will have the same tax consequences apply to them from a transaction) and clarifies how the Commissioner for SARS would interpret and apply the provisions of the tax laws relating to a specific proposed transaction.

BCR 068 determines the very technical consequences of transferring surplus retirement fund assets between funds and allocating assets from employer surplus accounts to retirement fund member accounts of members. Employers that are part of retirement funds should take note of the ruling and consult where necessary.

The ruling considers sections 1(1) (specific definitions in the “gross income” definition), 11F and paragraph 2(l) of the Seventh Schedule of the Income Tax Act (dealing with taxable fringe benefits).

The Parties to the ruling

• The Applicants are resident companies who are participating employers to the Co-applicants.
• Co-applicant 1 is a defined benefit pension fund.
• Co-applicant 2 is a defined contribution pension fund.
• Co-applicant 3 is a defined contribution provident fund.
• The class members are all qualifying members of the co-applicants, former employees or dependents of deceased employees.

Transactions which the members of the class propose to enter into

Since the class members are entitled to, and the applicants are liable to fund their post-retirement medical aid benefits, the applicants, with agreement by the class, wish to eliminate this liability towards members by:

• Allocating assets in the employer surplus account of co-applicant 1, to the retirement accounts of the class members of co-applicant 1.
• Transferring a portion of the assets of the employer surplus account of 1 to those of co-applicants 2 and 3.
• Allocating assets in the employer surplus account of co-applicants 2 and 3 to class member retirement accounts of these co-applicants.

Essentially, the applicants aimed to move surplus assets between the different funds without incurring tax costs, to the benefit of employees.

The Ruling

Contributions by the applicant to the co-applicant will constitute a fringe benefit and will be deducted by the class members in determining their taxable incomes. This would have been the case in any event and is not a contentious finding.

However, when the application transfer assets from the employer surplus accounts of co-applicant 1, to co-applicant 2 and 3, and lump sum allocations from the co-applicants to the member’s respective retirement accounts, no tax costs will arise, and specifically:

• Not constitute a taxable fringe benefit for the class members.
• Constitute an amount received by or accrued to class members subject to tax.
• Be deductible by class members when determining taxable income.

Class members will still be taxed on payments to them by co-applicants which constitute gross income, income or taxable income, irrespective of whether these are payments as a result of regular contributions, or surplus amounts allocated to class members.

This ruling is a very pragmatic approach to the re-distribution of surplus assets within retirement funds.

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)