select
|

Tax Tips: How property can save you money

(By Kathy East)
 
That time of the year again – 28 February was the closing of the annual tax season for the period  1 March 2013 to 28 February 2014. Once your IRP5 has been submitted you anxiously await the decision made by SARS as to whether you need to pay in, or hopefully, that you receive a refund directly into your bank account.
 
Either way, it is time to reflect on the coming financial year-end 28 February 2015, and to start planning on how best to focus on your financial growth. By having your income submitted to SARS you could generate a positive cash flow. For you to benefit from tax deductions, the ideal investment would be in property. It is known that to have a successful property portfolio to increase your net worth is possibly the best investment you could consider.
 
It is easy to purchase an affordable property when you consult an Engel & Völkers office in the area where you have identified to have this home.  Our skilled property sales advisors are able to assist you in matching your available funds to the type of home which will suit your lifestyle, or in locating a second property that you could rent out, and benefit from certain tax deductions. By visiting www.engelvoelkers.com/south-africa you will locate the closest office to where you are considering purchasing your first or second home.
 
The positive benefit to you by purchasing property with the idea of generating a rental income, will not only cover your bond, but also allow you to claim for certain expenses you may incur with this rental property.
 
You are encouraged to consult a tax advisor to ensure your specific situation is given the correct legal guidance.
 
According to Johan Swart, tax manager at Legal & Tax, SARS should allow the following deductions against the rental income received:

- If your property is bonded, the portion of interest paid on the dwelling, in relation to the property.
- You can claim depreciation on the furniture and appliances, but it is a minimal 15% per annum, at the depreciated value.
- Renovation costs are not as straightforward.  If the renovations were improvements, for example new cupboards and tiles were fitted to a kitchen, it would not be tax deductable against rental income received, but would be capital in nature. Record of these costs must then be kept to be taken into account against any capital gain, should the property be sold. If the renovations were new paint, replacement of old carpets etc, it would be mainte-nance and repairs, and would be deductible against the rental income received.

As a summary, rental income is taxed at specific rates and those expenses actually incurred, that can be deducted from SARS, would be:

- Levies
- Rates & Taxes
- Interest payments on bond
- Insurance premiums
- Agent's commission
- Repairs and maintenance costs
- Collector's income
- Bank charges
 
All income must be declared to SARS, therefore the total rental you receive must be included on your annual tax return. If SARS finds out about additional income, by means other than a declaration by the taxpayer, it will lead to additional penalties over and above the normal tax payable.
 
ABSA promotes their Buy-to-Let Home Loan by stating that with Absa as your property investment partner, you will enjoy access to a customisable Buy-to-Let Home Loan that can be tailored to suit your specific investment needs, together with competitive interest rate options and flexible repayment terms.
 
Available to non-South African residents as well, the Absa Buy-to-Let Home Loan can be registered in the name of legal entities, such as companies and trusts, as well as individuals. There is no need for a proven rental on new property, the rental income will be deemed to be 1% of the property value or purchase price.
 
- A Buy-to-Let Home Loan could be the right choice if you:
- Want to acquire residential property with a view to rent it out
- Would like to use all or part of the rental income to cover your monthly repayments
- Would like discounts on attorney conveyancing costs
- Would like a choice of repayment terms of up to 30 years (with the option of reverting to 20 years at any time)
- Fixed or variable interest rate options
 
As cautioned by Craig Hutchison, CEO of Engel & Völkers Southern Africa, before buying your second home ensure you are assured of maximising your money's potential.  Be clear on what your objective and budget is, understand there is a risk, and be involved with the management of the whole rental process.  Nobody else will look after your money as you do.
 
It is thus advisable, he continued, to work through an established truly international real estate company such as Engel & Völkers, as we are able to provide you with numerous property choices to suit your requirements. You can then enjoy a future with an enviable property portfolio.



  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 24 Nov 2017
      Demand for secure estate living in Hout Bay has risen sharply in recent years, precipitating a spike in development with estate homes now accounting for 20.24% of the property landscape with the launch of an exclusive new gated development on 26 November adding 20 more units to the existing 1250 estate homes.
    • 24 Nov 2017
      There are some things that money can’t buy – spectacular views from Mouille Point to the V&A Waterfront and a trendy and lively neighbourhood that encapsulates the very best of the Cape Town lifestyle.
    • 24 Nov 2017
      Tshwane’s four-bedroom Mayoral mansion, nestled among ambassadorial residences in the upmarket suburb of Muckleneuk, fetched R5.1 million after spirited bidding at High Street Auctions’ final sale of the year.
    • 23 Nov 2017
      Reserve Bank Governor, Lesetja Kganyago, said that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK