08 August 2009

Huge Tax Break On Properties

Monique Vanek
27 July 2009

What you should know to transfer your property out of a company and get a 22% tax saving.

Seldom does the South African Revenue Service (Sars) open a tax-free window period, and rarely does it do it twice. So when it announced in a June draft amendment that individuals who own their primary residence in either a company, or a closed corporation (CC) can transfer their property tax free into their own name for the second time it came as a surprise and should be taken advantage of.

The draft amendment is likely to be finalised in the next few weeks, here's the lowdown. All individuals who own their primary residence in either a company or CC can transfer their property into their own name without having to pay capital gains tax (CGT), transfer duty and secondary tax on companies (STC) from January 1 2010 until December 31 2012. This is a huge tax saving of just under 22%.

They can only do this if their domestic residence is exclusively used for domestic purposes, says Mike Teuchert, a tax partner at Grant Thornton. However, "no clarification has been given to the meaning of the term domestic purposes, although it would exclude the situation where a person also uses their residence for the purposes of running a part-time small business", says Teuchert.

Unfortunately the exemption does not apply to those who own their primary residence in a trust, as was the case in the previous window period, however this could change in the final draft, notes Deborah Tickle, a member of Saica's National Tax Committee.

Also if the property is not in your own name you can not take advantage of the exemption.
For those who transferred their properties out of a CC, or company after the 2001 window period and before this new one starts you will not be reimbursed, says Tickle. Of course this exercise is not without costs, says Teuchert. You will still be responsible for costs associated with the transfer of you property, such as conveyancing fees and bond cancellation costs, reckons Teuchert.

So how do you go about transferring your property out of your CC or company? Firstly, you'll have to visit a conveyancing attorney to transfer your property, cancel your bond and register it in your own name. Secondly, you will need to make sure your books are in order and close them off. Thirdly, you will have to fill in a tax return and supply Sars with your latest set of accounts. Finally you will need to deregister your company with the Register of Companies, says Tickle.

Ntombikayise Baepi a senior associate at ENS reckons Sars has provided this second window period to cleanse the Register of Companies of inactive and dormant companies. Tickle says it has also done so to help individuals avoid the high costs of being a registered company when the Companies Act comes into full force next year.

01 August 2009

The best way to sell your property

Isn't it interesting how in these times we read that the best way to sell a property is by public tender or auction? The truth is that in a Buyers' Market it is only bargain hunters who attend auctions or submit tenders. Quite simply, they are the investors with cash and are looking for bargains. Auctions and tenders will only realise decent prices if the seller has a unique one of a kind property, such as the last piece of prime beachfront land.

I'll let you into a secret. The ONLY factor that sells property is PRICE! Price is relative to position, location, condition, age and other similar factors. If your property has not sold in the current market IT IS OVERPRICED. A few years ago there may have been 50 buyers in any month looking for property like yours. Today there are 20 buyers and they are comparing prices of all similar properties. If your property is overpriced it is compared to lower priced properties and those are the ones that are selling.

So, if you need to sell now, listen to a reputable Estate Agent and price your property competitively to sell in the current market. Estate Agents are not motivated to sell overpriced properties, but overpriced properties do fortuitously help them sell the better priced ones!

So what is the best solution? Deal with a reputable Estate Agent with a proven record of sales in your area, grant them a Sole Mandate and ensure that you receive a written marketing plan for your property. Make sure the mandate can be cancelled should the Agent not implement the marketing plan! Your Agent will then work hard on marketing the property, and spend money doing so, and is unlikely to accept a Sole Mandate appointment if the price is not market related.

Plettenberg Bay's Brackenridge Estate leads the way with penalty levy moratorium


John Fuller, Principal of Chas Everitt International Property in Plettenberg Bay says that the Brackenridge Homeowners Association in consultation with the Developers have taken a bold decision to provide a two year building moratorium to buyers of vacant stands in Brackenridge Estate. Brackenridge is one of Plett's most exclusive and secure residential estate developments. He says it is a commendable move that will hopefully attract more buyers to Brackenridge.

Brackenridge Estate has sold very well and approximately eighty new homes have already been built, but the original deed of sale provided for penalty levies if houses were not built within a required time frame. These penalties were implemented against many owners, but for 2009 (expiring in February 2010) a moratorium on penalty levies was granted to assist owners during the current economic crisis.

Fuller said that while this moratorium assisted existing investors, it affected the interest of potential new buyers who require clarity regarding the imposition of penalties beyond 2008. He said that as an estate agent he had made suggestions to the Homeowners' Association and he hoped that other developers would realise that the secondary residential property market had changed forever and it could be a very long time before a sellers' market is seen again. If bold decisions were not taken to encourage buyer interest, demand would decline further, negatively affecting the value of all properties in the developments. Brackenridge's decision will therefore hopefully increase demand for stands in the development from serious buyers, help to underpin declining stand prices and also boost construction activities on the Estate.

The communique from the Chairman of the Brackenridge Homeowners' Association states:

"In order to facilitate potential new sales of stands in Brackenridge it has been agreed in principle, (subject to periodic review) by the Developer, after due consultation with ourselves to introduce the following with immediate effect:

1. A Moratorium on Penalty Levies will be granted to all new individual buyers of stands in Brackenridge for a period of 2 years from the date of the conclusion of the Sale Agreement.

2. This moratorium is to be granted to buyers who have a genuine intention of buying to build and is designed to facilitate the process of Architectural Planning, BARC and Council plan approvals, appointment of Building Contractors and arranging appropriate funding.

3. Should building not begin within the 2 year time frame the normal 5 time penalty levies will apply.

4. Should the property be resold the new buyer will only assume the remaining term of the two years still to run.

This moratorium will be introduced with immediate effect and is unrelated to the existing General Penalty Levy Moratorium currently in place which expires on the 28th of February 2010".

Fuller says that superb 1500 square metre stands at Brackenridge are the best bargains in Plettenberg Bay with some resale prices having dropped as low as R400 000. He says such entry level prices are ridiculously cheap in an estate that is probably Plett's best residential housing estate development and anyone seriously considering building a home in Plett should place Brackenridge at the top of their list.

For Further information or to purchase property at Brackenridge please contact Zelda Kruger on +27 (0)82 320 0664, email her at zeldak@everitt.co.za, or go to http://www.brackenridgeproperty.co.za/ or http://www.everitt-plett.co.za/