SARS is coming after these property owners in South Africa
South Africans that own one or more investment properties rented out to tenants are likely to be caught in the South African Revenue Service’s (SARS’) ever-expanding web – and property experts warn landlords to get their tax affairs in order.
Berry Everitt, the CEO of Chas Everitt International property group, said property owners are required to comply with standard tax compliance practices. Any payment received from a property that is rented out forms part of declarable income.
This must further be declared to the South African Revenue Service (SARS) on an annual tax return.
“Deliberately not declaring it is effectively tax evasion, which is a crime and could lead to you having to pay a hefty fine – or even jail time for up to five years,” the CEO said.
“As SARS continues to improve the efficiency of tax collection, it is increasingly unlikely that any such non-declaration and or under-declaration will remain undetected.”
However, Everitt said it is not all doom and gloom for landlords.
People who rent out either an apartment or other properties are allowed to deduct all expenses that are related to the letting of the property from the gross rental received when calculating the taxable amount of income received from a rental property.
The CEO said these expenses typically include but are not limited to:
- Any interest paid on a bond;
- Homeowners’ insurance premiums;
- The municipal rates paid for the year;
- Any amounts paid to repair and maintain the property;
- Any levies paid.
According to Everitt, if landlords are retired and not earning any income – it is possible that rental income will fall below the tax threshold for their age group and that they will have no tax liability.
However, as a landlord, they still need to submit a tax return or risk having to pay an administrative penalty, he said.
On 22 February, finance minister Enoch Godongwana outlined the updated personal income tax brackets that have been adjusted in line with expected inflation.
For individuals under the age of 65, the threshold is R95,750. Those aged 65 to 75 have up to R148,217 as their threshold, and those over 75 have a threshold of R165,689.
Everitt noted that South African tax law also empowers the taxman to issue tax assessments based on estimates to people who regularly fail to submit returns – and to charge penalties and interest on unpaid taxes.
The CEO added that if a landlord has previously failed to declare rental income – they should seek professional assistance from an accountant or tax consultant to voluntarily rectify the situation with SARS.
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