The Imputability of Sub-Income Under Section 7(3) of the Income Tax Act 1962
Section 7(3) of the Income Tax Act 58 of 1962 counters income splitting arrangements by imputing income received by a minor child by reason of a donation, settlement or other disposition made by the minor child's donor parent to such donor parent, thereby subjecting the imputed income to the d...
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| Language: | Afrikaans |
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North-West University
2025-07-01
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| Series: | Potchefstroom Electronic Law Journal |
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| Online Access: | https://perjournal.co.za/article/view/16292 |
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| author | Petra Claassen |
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| author_sort | Petra Claassen |
| collection | DOAJ |
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Section 7(3) of the Income Tax Act 58 of 1962 counters income splitting arrangements by imputing income received by a minor child by reason of a donation, settlement or other disposition made by the minor child's donor parent to such donor parent, thereby subjecting the imputed income to the donor parent's normal tax rate. The construction of the phrase by reason of has been a point of contention in cases dealing with sub-income (income on income). The secondary literature shows disagreement on whether it is still possible to successfully argue, as was done in the past, for an interpretation of by reason of that excludes sub-income from the scope of section 7(3). In addition to this disagreement, key judgments on the imputability of sub-income were delivered in 1949 and 1955, predating the enactment of section 39(2) of the Constitution of the Republic of South Africa, 1996 and the landmark judgment in Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 2 All SA 262 (SCA), which introduced significant shifts in the landscape of statutory interpretation. This study applies the Endumeni interpretative framework to section 7(3), with the discussion being structured around the modalities of the augmented Savignian Model. The analysis reveals that the present reliance on the Appellate Division's pre-1996 judgment in CIR v Widan is justified and therefore that sub-income may be imputed to a donor parent under section 7(3) if the parent's donation, settlement or other disposition is the effective (or proximate) cause thereof.
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| format | Article |
| id | doaj-art-c03e111a972644a38792dfb51bef95ab |
| institution | DOAJ |
| issn | 1727-3781 |
| language | Afrikaans |
| publishDate | 2025-07-01 |
| publisher | North-West University |
| record_format | Article |
| series | Potchefstroom Electronic Law Journal |
| spelling | doaj-art-c03e111a972644a38792dfb51bef95ab2025-08-20T02:45:42ZafrNorth-West UniversityPotchefstroom Electronic Law Journal1727-37812025-07-012810.17159//1727-3781/2025/v28i0a16292The Imputability of Sub-Income Under Section 7(3) of the Income Tax Act 1962Petra Claassen0https://orcid.org/0000-0002-3635-1342Stellenbosch University Section 7(3) of the Income Tax Act 58 of 1962 counters income splitting arrangements by imputing income received by a minor child by reason of a donation, settlement or other disposition made by the minor child's donor parent to such donor parent, thereby subjecting the imputed income to the donor parent's normal tax rate. The construction of the phrase by reason of has been a point of contention in cases dealing with sub-income (income on income). The secondary literature shows disagreement on whether it is still possible to successfully argue, as was done in the past, for an interpretation of by reason of that excludes sub-income from the scope of section 7(3). In addition to this disagreement, key judgments on the imputability of sub-income were delivered in 1949 and 1955, predating the enactment of section 39(2) of the Constitution of the Republic of South Africa, 1996 and the landmark judgment in Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 2 All SA 262 (SCA), which introduced significant shifts in the landscape of statutory interpretation. This study applies the Endumeni interpretative framework to section 7(3), with the discussion being structured around the modalities of the augmented Savignian Model. The analysis reveals that the present reliance on the Appellate Division's pre-1996 judgment in CIR v Widan is justified and therefore that sub-income may be imputed to a donor parent under section 7(3) if the parent's donation, settlement or other disposition is the effective (or proximate) cause thereof. https://perjournal.co.za/article/view/16292Sub-incomeProximate causeefficient causeincome splittingminor childsection 7(3) |
| spellingShingle | Petra Claassen The Imputability of Sub-Income Under Section 7(3) of the Income Tax Act 1962 Potchefstroom Electronic Law Journal Sub-income Proximate cause efficient cause income splitting minor child section 7(3) |
| title | The Imputability of Sub-Income Under Section 7(3) of the Income Tax Act 1962 |
| title_full | The Imputability of Sub-Income Under Section 7(3) of the Income Tax Act 1962 |
| title_fullStr | The Imputability of Sub-Income Under Section 7(3) of the Income Tax Act 1962 |
| title_full_unstemmed | The Imputability of Sub-Income Under Section 7(3) of the Income Tax Act 1962 |
| title_short | The Imputability of Sub-Income Under Section 7(3) of the Income Tax Act 1962 |
| title_sort | imputability of sub income under section 7 3 of the income tax act 1962 |
| topic | Sub-income Proximate cause efficient cause income splitting minor child section 7(3) |
| url | https://perjournal.co.za/article/view/16292 |
| work_keys_str_mv | AT petraclaassen theimputabilityofsubincomeundersection73oftheincometaxact1962 AT petraclaassen imputabilityofsubincomeundersection73oftheincometaxact1962 |