LUXURY AND COMMERCIAL PROPERTY MARKETS COULD HAVE A TOUGH YEAR AHEAD

LUXURY AND COMMERCIAL PROPERTY MARKETS COULD HAVE A TOUGH YEAR AHEAD

The Budget Speech in February touched on several aspects of property-related taxation. 

“The changes in capital gains tax (CGT) and transfer duties really only affect the upper end of the market, but of the average owner of a single primary residence, the costs of buying and selling property will stay pretty much the same.” 

“Transfer duty has remained completely unchanged for all properties priced under R10 million. A new tier has been added to the schedule for properties over R10m, which are now subject to % transfer duty as opposed to the previous 11%, but this will mainly affect the luxury and commercial markets.” 

Since primary residences are exempt from capital gains tax, those increases are also irrelevant to most property owners, only affecting companies, trusts and individuals with more than one property in their name. 

“It’s a neat and convenient way to tax the wealthy without affecting most middle class and poor people.” 

Those who are liable for CGT will be taking a fairly significant hit, however – even if only in the event of a sale. 

“Individual CGT has been increased from 33.3% to 40%, with the annual exclusion raised from R30 000 to R40 000 (death exclusion remains unchanged), resulting in a 19.71% increase in the maximum effective CGT rate. 

Legal entities like trusts and companies have dramatic numbers, with the previous 66.6% inclusion rate rocketing to 80%, increasing the maximum effective rate by a hefty 20.43%. 

Reference: 

Weekend Argus