BY CAMILIA DU PLOOY
It is that time of the year again, the start of a new tax season and time to start getting your documents together and also planning for the next financial year. To most of us, this topic is somewhat confusing; completely intimidating and downright not interesting at all … but did you know about all the benefits there are for owning a property and how greatly it could influence your tax deductions in a positive way?
Unfortunately paying a bond on one property, proclaiming it to be your main residence and not owning any other property or earning any additional income from your home, means that you will not necessarily benefit from any tax exemption or cash flow gains from personal income tax claiming every year end. While still inhabiting and paying off the bond, there is nothing much to get excited about until you decide to upgrade or downgrade your permanent residence by means of selling.
If the property is registered in an individual's name, it will be liable for Capital Gains Tax (CGT). A capital gain arises when you dispose of an asset. Craig Hutchison, CEO of Engel & Völkers Southern Africa explains that the first R2 million is exempt from CGT if it is the owner's primary residence, and if the property is registered to an individual.
The benefit of owning a property in a personal capacity is that the income tax paid when selling for a profit on the holding, might be lower (as little as 33.3% on the non exempt portion) than the tax paid if the property is owned in a company or trust's name. There is no minimum period that a person must live in a residence to claim it as a primary residence. However, the taxpayer must be able to convince SARS that the residence is his or her ordinary residence. A word of warning: A taxpayer who buys and sells properties at short intervals runs the risk of being classified as a property trader in which case any profits on disposal will be taxed in full as revenue gains.