Zakat on modern assets

The last lesson gave you nisab, hawl and 2.5%, plus the organising principle: zakat falls on wealth that grows, not on wealth you use. Applying that to a seventh-century merchant's inventory is straightforward. Applying it to an index fund, a locked superannuation balance and a crypto wallet requires judgement, and qualified scholars have reached different conclusions.

This lesson sets out where the agreement is and where it is not. Where there is genuine difference, it says so rather than picking for you.

Shares: the intention test

The agreed starting point is that your treatment depends on why you hold them.

Shares held for resale, bought to sell at a profit, are trade goods. They are zakatable at full market value on your zakat date, exactly like inventory. There is broad agreement here and the calculation is simple.

Shares held long term for their dividends (cash payments from companies you own part of) are the harder case, and two positions are widely held.

• The full market value view: zakat is due on the whole holding at market value. Simple, cautious, and the position most Australian Muslims in practice follow. Many contemporary bodies favour it partly because the alternative requires data that is often unavailable.
• The underlying assets view: you own a proportionate slice of a real business, and zakat should fall only on the zakatable portion of that business, being its cash, receivables and inventory, not its factories, equipment and buildings. This is the position reflected in AAOIFI's own standard, and it is more precise. It produces a substantially lower figure, because most companies hold far more in fixed assets than in cash.

The second view is harder to execute because you need each company's balance sheet. That is exactly the gap this site's tooling closes.

The zakat calculator looks up cash and receivables for recognised ASX tickers against the screener's own data, so the underlying-assets method is actually computable rather than theoretical. The full worked reasoning, with the AAOIFI reference, is in the guide on zakat on ASX shares.

For a diversified ETF (a basket of many companies in one purchase) holding hundreds of companies, most people reasonably fall back to the full market value approach, or apply a published proportion where the issuer provides one. Some Islamic funds publish a zakat percentage annually for exactly this purpose, which is a question worth asking your provider.

Superannuation: genuinely unsettled

This is the clearest example of a modern question with no settled classical answer, because the scenario did not exist.

Super is wealth in your name, with a balance you can read, that you have no legal ability to access before preservation age (the age you can legally access super), now 60 for everyone. Classical zakat assumes wealth you possess and can dispose of. Super satisfies the first and fails the second.

Three positions are held by qualified scholars:

1. Zakat is due annually on the full accessible balance, on the reasoning that it is your property, it is growing, and it is identifiable. Some holding this view deduct the tax that would be payable on release, since that portion was never yours.
2. Zakat is not due until you can actually access it, on the reasoning that complete ownership requires the ability to dispose of the thing. Under this view you pay for the year you receive it, and some hold you should then pay for the prior years as well once access exists.
3. Zakat is due only on the portion you voluntarily contributed, distinguishing money you chose to lock away from compulsory employer contributions you never controlled.

No position is taken between them here. What is worth saying plainly is that this is not a minor technicality: for a 40-year-old with a $200,000 balance, position one and position two differ by $5,000 a year. Take it to a scholar with your actual circumstances, decide, write down which position you follow and why, and then be consistent about it. Switching positions annually based on which is cheaper is the one clearly wrong approach.

Investment property

Two cases, one straightforward and one disputed.

Property bought to resell is trade goods. Zakat on full market value at your zakat date. Agreed.

Property held to rent out is the disputed one. The majority contemporary position treats the property itself as a productive asset rather than trade goods, like a machine or a farm, so zakat is due on the accumulated rental income you still hold on your zakat date, not on the building's value. A minority view assesses the property value itself.

The majority position is the more widely applied and is analogous to how the classical sources treat productive assets. Under it, the practical calculation is simple: whatever rent has accumulated in your account by your zakat date is part of your cash balance, and the building is not counted.

The home you live in is not zakatable under any view. Neither is a car you drive or equipment you use to work.

Crypto

The most common position is that where a crypto asset is genuinely held and tradeable, it functions as a monetary or trade asset and is zakatable at market value on your zakat date. Volatility (how much the price bounces around) does not change that, any more than it does for shares. You value it on the day, like everything else.

That said, there is a prior question this lesson will not pretend is settled. Whether particular crypto assets are permissible to hold at all is itself disputed, and the answer varies enormously by asset: a coin, a token representing a real asset, and a token whose entire function is speculative are not the same question. The riba lesson's treatment of gharar (uncertainty so severe the contract is really a guess) and maysir (gaining at another's expense purely on the outcome of chance) is the relevant framework. If you hold something and are not sure it is permissible, the zakat question is not the first one to resolve.

Business inventory and money owed to you

Inventory held for sale is zakatable at what you could sell it for on your zakat date, not at what you paid. Equipment used to produce goods is not zakatable, because it is a tool, not stock. The same business can therefore hold a zakatable warehouse of product and a non-zakatable set of machines that made it.

Money owed to you follows recoverability. A debt you reasonably expect to collect is part of your wealth and is zakatable. A debt you have no realistic prospect of recovering is not, and becomes zakatable in the year it is actually received, if it ever is.

The honest summary

Where a row says disputed, that is not hedging. It is the actual state of qualified scholarly opinion, and you are better served knowing that than being handed false certainty. Pick a position with someone qualified, record it, and apply it consistently year after year.

Check yourself

4 questions on this lesson. Nothing is recorded or sent anywhere.

1. 1What determines how shares are treated for zakat?

   • The size of the holding
   • Why you hold them: shares bought to resell are trade goods at full market value, while long-term holdings attract two different views
   • Whether they pay dividends
   • The broker you use

2. 2What is the position on zakat on superannuation?

   • Clearly due annually on the full balance
   • Genuinely disputed between three positions: due annually on the balance, not due until accessible, or due only on voluntary contributions
   • Clearly not due at all
   • Only due after age 60 with no disagreement

3. 3How is a rental property treated under the majority contemporary view?

   • Zakat on the building's market value
   • Zakat on the accumulated rental income you still hold on your zakat date, not on the building, since the property is a productive asset rather than trade goods
   • It is never zakatable
   • Zakat on the equity you hold in it

4. 4What is the difference between business inventory and equipment?

   • There is none
   • Inventory held for sale is zakatable at sale value, while equipment used to produce goods is a tool and is not zakatable
   • Both are zakatable at cost
   • Neither is zakatable