What is Sex 13 and F.L.I.S.P??
It’s not often that a residential development equally satisfies first time home buyers and astute investors at the same time, simply because the specific needs of these 2 very different groups of buyers are very, well, different.
What is Section 13SEX and how does it work? Basically, SARS wants to encourage investment and the provision of rental homes into the market so SEX13 allows you to decrease your taxable income. A buy to let investor can claim an allowance of 55% of the purchase price.
The 4 qualifying criteria are as follows: 1. The unit must be new and unused, so buying direct from a developer qualifies 2. Unit must be solely for the trade of the taxpayer, i.e. it must be a rental unit 3. The taxpayer (or entity – could be a trust or company) must own at least 5 rental units, all of which don’t need to be purchased all at once, but the allowance only kicks in once the 5th unit is acquired. 4. The unit must be in sunny South Africa.
Running the SARS numbers: Say you purchase 5 units @ R600,000 = R3,000,000 purchase value. SARS will allow a 55% write off against the acquisition cost. So R3,000,000 x 55% = R1,650,000 that SARS will allow you as a tax deduction over 20 years. This totals R82,500 per annum for 20 years. WOW! So if you are at the marginal income tax rate of 45%, then R37,125 is the rebate that SARS will pay back to you every year…for 20 years. Please visit www.thebase.joburg and click the investor link for more details.
F.L.I.S.P So what is FLISP all about… basically it’s about helping first time home-buyers get into the property market and start building their wealth with a govt subsidy of between RX to RY for South African taxpayers earning between R6K and R22K, who qualify for a homeloan but may be a little short.
-Article written by Ryan Van Heerden, CEO of Ryans Realty