Save big with transfer fee loophole

Amendment to transfer duty act will save thousands in divorce and death transfers. By Ingrid Smit

The result of a stroke by the government's pen in July this year will save divorced partners and surviving spouses thousands of rands – money that they would previously have had to pay to the South Africa Revenue Services (SARS) in the form of transfer duty on their properties.

This is according to Durban-based conveyancing attorney Roy Wolfson, who was commenting on the recent amendment to the Transfer Duty Act that removes the requirement by divorced or surviving spouses to pay transfer duty on the acquisition of their properties.

Wolfson says that the act previously exempted divorced or surviving spouses from paying a portion of the transfer duty on an acquired property only if they had been married in community of property. This section has now been amended by Section 16 of the "Small Business Tax Amnesty and Amendment of Taxation Laws Act, Act 9 of 2006", which was published on 25 July 2006 in Government Gazette No. 29068.

In effect, this means that no transfer duty will be payable by a surviving or divorced spouse who acquires the sole ownership of the property registered in the name of his or her deceased or divorced spouse on transfer into their name, says Wolfson. He adds that in his opinion, the definition of the word 'spouse' in the amended Act appears to include unions recognized as marriages in accordance with the tenets of any religion. It also encompasses same sex and heterosexual unions which the SARS Commissioner is satisfied are intended to be permanent. "The important provision here is that the definition goes on to say that in regard to these two institutions and in the absence of proof to the contrary, these unions or marriages are deemed to be without community of property."

"Consequently," says Wolfson further, "in the absence of contrary proof such as a written agreement or other contract specifying that the parties intend to be married or 'unioned' in community of property, it would only be on a 'divorce' agreement that an acquisition would be exempt. The death position would not automatically create an entitlement to a property or share in the 'out-of-community' estate because in any event heirs, whether by will or intestacy, have always been, and continue to be, exempt from paying transfer duty."

Wolfson says his understanding of the amendment is therefore that the community of property provision has been amended to include other religion or same sex unions where it can be proved that the intention was to be the same as a community-of-property "marriage".

"So, if there is no will or settlement agreement on death or divorce, it seems transfer duty would be payable in, for example, same sex unions unless either an acquisition is automatic by operation of law - in community agreement - whereby you are entitled to a half share anyway or you inherit by operation of the law of intestacy (no will) as a spouse," he says. "Bear in mind in every situation like this, where a same sex spouse inherits under a will, they are treated no differently to any heir or legatee who has always been exempt anyway."

Another Durban-based attorney, who wishes to remain anonymous, says: "Death and divorce are two calamities that should not generate transfer duty. They are expensive in their own right and shouldn't cost more than they do already."

In response to a request for more information regarding the scope of the amended act, the Durban SARS office says it is still awaiting such clarification in writing.

For more information contact your local SARS office, a convenyancing attorney, tax consultant or accountant and make specific reference to the Small Business Tax Amnesty and Amendment of Taxation Laws Act, Act 9 of 2006, which was published on 25 July 2006 in Government Gazette No. 29068.

Looking for a new home?
To find a property to buy, visit Find a Property and view listings of properties in all areas. Check out the PropertySPI and get an affordable online report on actual sold prices of properties in your area.

Property News
Click here for more property news articles.