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Tax on investment property?

12 Jun 2014

A Property24 reader asks:

A Property24 reader wonders if his wife buys an additional property how tax works and what can be claimed.

My wife and I have just sold our main property on the south coast of KZN, registered in both names, and will be moving into the official residence of a residential estate. I have another property registered in my name in the Eastern Cape currently used as a holiday home, but eventually it will be our retirement home.  If my wife buys a property on the estate with the aim to receive a rental income while she is working as an educator at a private school, would that mean:

  1. That she will be paying tax on both incomes (jointly)?
  2. This property is situated in the residential estate managed by a body corporate. Can costs for example, levies, maintenance, etc be deducted from the rental income if she keeps some sort of an accounting system bearing in mind that the property will be registered in her name and not in a trust. I presume the books do not have to be audited due to the average income through rentals, being approx R60 000 per annum?

Johan Swart, tax manager at Legal & Tax, advises:

Answer to question 1:

This deals with the purchase of additional property by a spouse. By the sounds of the question it would seem that the reader and his spouse are married ANC. In that case she will be paying tax on both the rental income and her salary. If married in community of property the rental income will be taxed in the hands of both partners 50/50.

Answer to question 2:

Yes – all related costs can be deducted from the income. Some sort of accounting system will make the completion of the annual tax returns easier. A basic excel spreadsheet will do. All supporting documents must also be kept – bond and levy statements, and any invoices/vouchers relating to costs incurred. No audit required.

Readers may submit questions to Property24’s Guest Expert panel and/or comment below. We may not be able to answer all questions received, but all will be considered.

About the Author
Johan Swart

Johan Swart

Johan Swart, tax manager at Legal & Tax, is a South African taxation expert with nearly two decades of experience. He began his career at the South African Revenue Service (SARS) as an assessor in 1991, before moving into the private sector as a tax consultant in 1996. Swart holds a Dip Tax (Diploma) and an Advanced Certificate in Taxation from the Institute of Advanced Studies, North West University

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