Harbour & Associates

The property market in South Africa is undergoing zero or near-zero growth, doubtless because it reflects the economy in general, and also because so many income earners are leaving the country because they believe they can do better elsewhere. So, is it a good time to buy? It usually makes no difference whether you buy when the market is low or when it is high. The trick is always to buy below prevailing prices. The first consideration is why are you buying? Somewhere to live. If this is a first time buy, then yes, buy when the market is low.

So, your trust owns investment properties and is liable for 45% tax on the net income. You read my article about how this should have been structured. Is it too late to put it right? Fortunately, it can still be done thanks to s42 of the Income Tax Act. You need to do an asset for share swap. Here’s how it works – You need to slip a company between the portfolio and the trust. Ideally, it needs to be a company that you newly form. Then the first issue of shares is in favour…

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…

You get the cheapest properties at Sheriff’s auctions and they can earn fantastic returns, but there are significant risks. Firstly, the sheriff does not give you vacant occupation. This means that there is usually someone using the premises and you either have to negotiate a deal with them or get an eviction order and then have the sheriff evict them. The eviction is easy and only costs about R10 000. The problem is that once you’ve got them out, you’ve got to keep them out. The chances are they’ll simply break in the next day and you cannot ask the…

There are three ways of moving assets into a trust and they all have different tax consequences Donation Many people think that this is what they need to do. Problem is you’re only allowed to donate R100 000 total per annum. After that you have to pay 20% Donations Tax so this is not the way to go. Sale This is the normal way. You sell the asset to the trust, or usually a company owned by the trust (the sale price is deemed to be at market value for tax purposes) and take the tax consequences which are usually…

So, you’re investing in property in order to sell it at a profit or to earn rental income. Either way this is trade and if the trust owns the property the tax is 45%. How do you avoid this heavy tax? But firstly, why hold the property in a trust in the first place? The reason is that you want to grow your wealth and you do not want too much wealth when you die as it is subject (after allowances) to 20% Estate Duty and up to 18% CGT, a total 38% of your investment wealth (ignoring the allowances)…

Property

Should I be buying property now?

Property Investment and Related Taxes

Property investors beware the Sheriff’s auctions

How to move assets into a trust

How to use a trust to invest in property

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Should I be buying property now?

How to fit a company between your trust and its properties

Property Investment and Related Taxes

Property investors beware the Sheriff’s auctions

How to move assets into a trust

How to use a trust to invest in property

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