Investors have access to powerful tax incentives, including the popular Section 13sex of the Income Tax Act No 58 of 1962. This scheme enables any taxpayer who owns five or more new, residential rental units (do not all have to be from the same development), to claim up to 55% of the purchase price as a tax deduction.

Example:

• Purchase five units at a total purchase price of R6 797 000
• Deemed purchase price = R3 738 350 (55% of final purchase price)
• 5% of the deemed price may be used as a tax deduction per year
• This works out to a tax deduction (tax write-off) of R186 917 per year for 20 years.

Total tax write-off = R3 738 350 (over 20 years).

Taxpayer criteria for Section 13Sex

• The taxpayer must own at least 5 residential units. The deal kicks in once the buyer takes ownership of their 5th new unit. A residential unit refers to a building or self-contained apartment, mainly used for residential accommodation with the exclusion of structures used for business purposes, for example, hotels.
• All units must be situated in South Africa.
• Residential units must have been purchased new and unused. (For example, buyers of flats that had previously been occupied would not qualify for this incentive.)
• The units must be used solely for the purpose of trade (i.e. residential letting). This prevents housing claims for personal use.
• Please consult your tax advisor for further clarification and information.