Owners Tax Relief

Property buyers in the buy-to-let market can take advantage of tax relief being offered.

Certain income tax allowances provide significant tax relief to investors who have 5 units or more.

There have been additions made to Section 13 of the Income Tax Act which allow the taxpayer to claim an annual allowance of 5% of the cost of a new home over 20 years, until the full cost of the asset has been written off.

The qualifying criteria is not that onerous, the property must have been bought on or after 21 October 2008; the property must have been bought specifically to rent out; the taxpayer must own at least five units in South Africa and the cost of the unit must not be a tax deduction in any other way.

TPN reports and the agents feedback in Cape Town at present, shows that the demand from tenants is there in certain brackets.

With people in the R3,500-00 to R12,000-00 rental bracket being such good payers (the last report shows that ±86% of these tenants were in good standing), and now this tax incentive, it makes sense to invest in smaller units that will give a good return such as one or two bedroom units that cost around R550,000-00 to R1,000,000-00 which will achieve rentals of around R4,500-00 to R8,000-00 + pm depending on the area.

Contact Mike Thorne for more information.

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