Investment property tax Q&As

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Two Property24 readers ask their tax questions and Johan Swart, tax manager at Legal & Tax, advises:

Question 1: Rental property – what percentage of expenses can be deducted?

Two Property24 readers ask about tax deductions for investment property and what the implications are if moving to Australia.

My wife and I jointly own a property in Mpumalanga that we rent out and she does all the administration and contracts. What percentage of the monthly rental amount (rental agencies I see take up to 12% for administration costs) that we receive can we deduct from tax for administration costs and must this be divided 50/50 for tax purposes?  Both my wife and I work so this is a second income.

Answer 1: It is fine to allocate 12% of the rental income to your wife for administration costs – just remember that this must then be declared as a separate income in her annual tax return. Your rental income calculation will therefore reflect the administration costs as a deduction, and the balance of the rental income divided 50/50, with the administration costs reflected as a separate income for your wife.

Question 2: Rental property income – tax if I move to Australia?

I bought two properties in Port Elizabeth where one is almost paid off and the other one I still have a bond on. I want to rent both out, will I need to pay tax on the income if I am living in Australia? What will be the best option for me?

Answer 2: Yes – you will have to pay tax on your South African rental income. You will also have to get advice on the Australian side regarding their tax laws. Chances are that as an Australian resident you will have to declare your South African income, and the tax that you have paid in SA will be allocated as a tax credit in Australia.

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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