Harbour & Associates

It was once fashionable to hold property in a company, so that when you wanted to sell it, you sold the shares only and the purchaser avoided Transfer Duty, so you got a better price. That led to a structure like this. This assumes that the properties cost R10m and are worth R40m when you die. The company must have borrowed the R10m to buy the properties, so it is worth the gain in the properties’ value. Despite changes to…

With the 2019 Budget speech behind us, Estate Duty has gone from 20% to 25% on the amount by which an estate exceeds R30m. That’s five new reasons for holding assets in a trust. But really? Is anyone who’s sharp enough to accumulate R30m not going to have woken up to the idea of a trust? The answer, amazingly, is yes. There are such people out there. I’m currently finalising a business plan for a client who wants to buy a very profitable 28 year old dealership for, guess, R30m and the seller owns the shares in his company in…

There are several taxes that you need to be familiar with if you invest or trade in fixed property. Income Tax The seller will pay Income Tax on the sale of property which was bought (and perhaps renovated) with the object of selling at a profit. The taxable income will be added on top of any other taxable income earned by the seller before calculating the total tax (at 28% for companies and up to 45% for individuals). Capital Gains Tax (CGT) The seller will pay CGT on the sale of property which was bought (and perhaps renovated) with the…

How do you figure out how long it will take for the Rand to halve in value at a particular inflation rate? Use the Rule of 72! This remarkable “Rule” is very accurate, but is not mathematically exact. Let’s say that you expect inflation to average 7%. You have R1m under the mattress. How long before it is only worth R500K in buying power? You divide the number 72 by the inflation rate 72/7 = 10 years. Isn’t that clever? Say you expect inflation to average 9%, then your R1m will be worth only R500K in 72/9 = 8 years…

Estate Duty Estate Duty is charged at the rate of 20% (same as Donations Tax) on the net assets of the deceased estate (including deemed assets). Each person is exempt from Estate Duty on the first R3,5m of their estate. Any unutilised portion of this R3,5m carries over to the deceased’s surviving spouse and is added to that spouse’s R3,5m exemption. Bequests between spouses are free of Estate…

It often happens that a trust owns investment property that would be better held by a company which is, in turn, owned by the trust. This is because companies pay 28% Income Tax whilst trusts pay 45%. So, how do we give effect to this without incurring a lot of tax? Fortunately, s42(2) of the Income Tax Act comes to our rescue as far as CGT is concerned. Provided the property was held for investment and not trade (that is, not with the intention of selling it at a profit) and provided it is transferred to the company in exchange…

CGT

The Double CGT Trap

Five more reasons why the wealthy must have a trust

Property Investment and Related Taxes

Inflation and the Rule of 72

Deceased estates, how they are taxed if there’s no trust

Transfer of fixed property from a trust to a new company to be owned by the trust

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The Double CGT Trap

The s42 Asset for Share swap double CGT trap

Five more reasons why the wealthy must have a trust

Property Investment and Related Taxes

Inflation and the Rule of 72

Deceased estates, how they are taxed if there’s no trust

Transfer of fixed property from a trust to a new company to be owned by the trust

Do you want to leave your cart?