Section 12J tax-deduction (as much 45%) incentive for property investment set to expire
Some R9.3billion has been invested into South African opportunities via Section 12J as of Feb 2020, according to the 12J Association of South Africa - and unless SARS extends the cut-off date, this incentive of as much as 45% back in tax on your property investment is set to expire in June of this year - making it a case of 'get in while you still can' for investors.
Section 12J funds will be gearing up for a flurry of interest as investors into the tax incentive realise it may be now or never to make the most of the tax break offered. Not only are investors clamouring to benefit from the tax deduction before financial year-end on 28 February 2021. However, if the Minister of Finance does not extend the applied Sunset Clause in his National Budget address on 24 February, this may very well be the penultimate tax season in which SARS will make the incentive available.
Section 12J has matured into a viable alternative investment vehicle as tax-payers and investors have in more recent years grasped the opportunity since its low-key introduction in 2009. From its fundamental aim of boosting the SMME sector by incentivising investors with a handsome tax break for raising venture capital, many specialists have refined their offering and, in so doing, opened the net wider for more tax-payers to benefit.
2021 FFC delays | Task team appointed as EAAB and REBOSA head to court
The Estate Agents Affairs Board (EAAB) has admitted that there were issues with a number of FFC applications for 2021 - but Rebosa says the regulator had ample time after the October 2020 deadline to sort these out.
Estate Agents Affairs Board CEO Mamodupi Mohlala says the EAAB has delivered its "best ever performance" in issuing the required Fidelity Fund Certificates for 2021, and plans to oppose the high court application by the Real Estate Business Owners of South Africa (REBOSA) that claims the regulator is failing to do its duties.
REBOSA turned to court action at the end of January claiming the EAAB is in breach of its statutory duties according to Estate Agencies Affairs Act 112 of 1976, and is asking the court to order the regulator to urgently issue the necessary certificates. REBOSA, acting on behalf of its members, claims the EAAB has "become an active hindrance to their ability to conduct business in accordance with the law".
However, Mohlala says, "We are in the process of preparing our answering affidavit and we have served the notice of intention to oppose the application."
Lockdown and rental rebates | Tax return tips for landlords
Owning a rental property portfolio that provides an income is much like owning a business. This means that there are tax implications and dues that need to be paid to the South Africa Revenue Service.
If you earn income from renting out a property, or even subletting a room in your home, you need to pay tax on it. Whether it is your only source of income, or supplementing a salary you receive, this rental income must be declared to SARS. Rental of residential accommodation includes all of the below:
AirBnB holiday homes bed-and-breakfasts guesthouses sub-renting part of your house e.g. a room or a garden flat residential dwellings
At the onset of the hard lock down in late March 2020, the sad reality of wide spread loss of income was a real worry for both tenants and landlords, says Michelle Dickens, TPN Managing Director - the largest aggregator of tenant rental payment behaviour in South Africa.
Lesser-known property sub-sectors offer hope for battle-scarred investors
Despite the patchy property performance last year, there are still pockets of excellence for the smart investor. This is particularly the case in the seldom spoken of sub sectors of our property market, which hold real value to those who are prepared to take the road less travelled in 2021.
“Most investors track the well known and heavily traded commercial, industrial and residential markets. However, many investors and would-be investors don’t realise that the property market is deeply complex with around 25 sectors and sub sectors, each of which are recovering at very different rates,” explains Gary Palmer, CEO of Paragon Lending Solutions. “For the astute investor, however, there is still real value to be had if you know where to look.”
Local investors remain cautious about the property market, which they view as high risk. And this is not surprising given the bruising 2020 performance. But Palmer believes the tarnish of many of the property asset classes should not cast a pall on the sector as a whole.