Property investors always seek ways to boost the Return on Investment (ROI) for the properties they buy over the years. One of the more beneficial tax opportunities is leveraging the Section 13 Sex Tax Act. This law is a critical tool that can reduce taxable income and increase capital outlook. This blog post uncovers what the Section 13 Sex Tax Act entails, how it works, and how you can benefit from it.
Jacques Fouché, IGrow CEO and Founder, has taken a deep dive into the Section 13 Sex Tax Act in this PDF, which is an excellent resource for property investors who want to know more) and covers useful information you can use in your arsenal. For an overview, read more here!
What does Section 13 of the Tax Act entail?
The Section 13 Sex Act is part of South African tax law aimed at incentivising property investment and allowing considerable tax deductions to benefit property owners/investors who own residential rental properties. This Act means investors can claim deductions for the depreciation of new constructions or residential properties that have been improved to be used for rentals. In summary, it enables property investors to deduct a part of their property’s value from their taxable income each year.
SARS requirements that must be met to qualify for Section 13 Sex Act Tax Law
According to SARS (South African Revenue Services), Requirements of section 13sex: A taxpayer may deduct an allowance of 5% of the cost to the taxpayer of any new and unused residential unit, or any new or unused improvement to a residential unit, if the following requirements are met:
- The unit (“property”) or unit with improvements/renovated elements was acquired or construction started, on or after 21 October 2008. The unit or improved unit must be owned by the taxpayer.
- The unit or improvement is utilised by the taxpayer (property investor that owns the property) solely for the taxpayer’s trade- namely as a rental property.
- The unit must be located in South Africa.
- The taxpayer must own a minimum of 5 residential units within South Africa, used solely as rentals, and for no other purposes, or the deductions associated with this Section 13 tax act will not apply. (Source).
How does SARS implement the Section 13 Sex Tax Act?
SARS requires compliance with the Act and monitors this by requesting comprehensive documentation of your properties. This includes all your Purchase Agreements and detailed proof of rental income from your various properties.
Expert tip: you need to keep up-to-date records regarding your properties and adhere to SARS guidelines regarding Section 13 Sex Act. This is critical for when you claim your residential property deductions, so you don’t run into any issues.
How does the Section 13 Sex Act Tax calculation work?
The tax deduction is calculated from your property cost, minus the land value. If you own a multitude of properties that qualify for this deduction, you can claim to get deductions on each property unit, if they meet the requirements of the Section 13 Tax law. This compounding effect can incur big savings for investors who own extensive property portfolios.
Section 13 Sex Act Deductions Explained via a Case Study
Consider this case: an investor buys a new buy-to-let property that costs R2 million.
With the Section 13 Tax Act, the investor can claim a yearly depreciation deduction of up to 5% of the property’s value (minus land costs). If you look ahead at the next 20 years, this annual deduction accumulates to around R1 million in tax-deductible expenses. This lightens the investor’s taxable income load and boosts their returns, in general.
The benefits and incentives associated with the Section 13 Tax Act
The Section 13 Sex Tax Act provides specific benefits for property investors:
- It increases cash flow: by reducing your taxable income, so investors will retain a greater portion of their rental income.
- It encourages property development: the Sex Act incentivises the construction and purchasing of new residential properties. This helps fulfill the needs of a growing housing market.
- It allows for property portfolio expansion: by decreasing tax liabilities, investors can reinvest their savings to finance the purchase of additional properties. They can then grow their property empire!
The Lynx- presented to you by IGrow
IGrow guides you through the intricacies of the Section 13 Tax Act
IGrow has years of experience with this Act, and our different companies can help you stay compliant. For instance, IGrow Rentals will manage your tenants and provide you with records of rental income, levies paid, maintenance expenses, and any changes in rental rates. IGrow’s Chartered Accountants will send you timely annual reminders of required documents and can create online shared drives to keep these documents on file for easy submissions.
IGrow property investment experts and our tax consultant team are adept at guiding investors to maximise their tax benefits under the Section 13 Sex Tax Act. The IGrow wealth investment team pinpoints qualifying properties and helps investors cleverly structure their investment portfolios. IGrow’s tax consultant team strives to help our clients get the best out of their tax savings. This team works together with investors to maneuver through the intricacies of the Section 13 Sex Act and reap the full benefits associated with it.
IGrow Properties for Sale and the tax benefits linked to them
Some IGrow properties for sale at the moment are hand-picked by our agents to comply with the requirements of the Section 13 Sex Tax Act. This ensures you gain from tax-efficient property investments. For example, prime current properties for sale that could attract Section 13 sex tax benefits are the exclusive Summerview development in the Western Cape, outside Somerset West, or the exciting new style of development, 33@View in Gauteng, where you can choose your own features from a range of plan types.
There is also the excellent value for money offered by the attractive Circa Illovo development in Sandton or the exclusive The Lynx development in Woodmead. These secure developments are all in popular suburbs highly sought-after by tenants and are offered at exclusive below-market value prices to our investors, providing excellent rental income returns.
With our tax consultants on your side, you can benefit fully from important tax deductions. The savings accumulated from these tax deductions can be pushed into your property portfolio managed by IGrow.
IGrow Property reviews: Benefits for both tenants and investors
Our team has received high ratings for IGrow property since the company’s inception in 2006. Reviews often bring up the benefits investors’ and tenants’ experience, when partnering with IGrow. Investors enjoy the perks of A-grade IGrow properties chosen for their strong rental demand, while tenants enjoy the modern, well-maintained homes investors offer – with the assistance of our rental management team.
These IGrow properties also offer tenants a dream lifestyle with many amenities, that better tenants’ lives. These include an array of facilities our IGrow properties cater for, from superior security complexes to indoor gyms, and yoga studios to outdoor running and cycling trails. Some developments are set in estates that offer a nature reserve feel or even farm life and dams, such as Summerview.
5-Star review for IGrow Wealth Investment consultants
“I would like to give a huge shout out to Jessica Van Dyke. Who was instrumental and quite helpful in my recent purchase with Igrow. Always available, attentive and ready to action discussion points. Her after sales care was and still continues to be amazing. Thank you Jessica.
Additionally I would like to appreciate Crystal Leetion my portfolio Manager. To say She has been amazing would be an understatement, simply exceptional! Particularly as I am non-resident I rely heavily on her to take care of business for me. She is highly professional and very responsive and eager to help. Thank you Crystal! Keep up the good work.
A very big shout out to you both ; Jessica and Crystal”. – Mendy Mutetwa
What are the hidden benefits of the Section 13 Sex Tax Act and how can they be applied?
Beyond the obvious tax deductions, Section 13 offers hidden benefits through careful financial planning, boosting your cash flow. As you reduce your taxable income, you will have more liquidity to use as reinvestment in your property portfolio and to meet additional financial requirements. Making use of these benefits needs carefully planned strategies. For example, pinpointing qualifying properties, keeping accurate records of your properties, and consulting with tax consultants like our IGrow property investment and tax consultant teams will allow these benefits to take shape.
Conclusion
The Section 13 Sex Tax Act is a true revelation for investors if they are unaware of it. The tax deductions and incentives this Act provides lead to investors buying residential properties that are positioned as buy-to-let properties. This helps investors build their property portfolio empire.
IGrow’s expert team will help you on your journey, through this complex tax system and ensure you get the best out of your investments!
IGrow CEO and Founder, Jacques Fouché, leaves us with this thought:
“Smart tax planning is the cornerstone of successful property investment.”
