Transfer duty on property

Posted On Thursday, 25 February 2016 12:16 Published by
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Adjustments to transfer duty on property in the 2016 national Budget are to impact only the upper end of the residential property market.


The 2016 national Budget was tabled in the South African Parliament by the Minister of Finance, Pravin Gordhan, on Wednesday, 24 February 2016.  

The Budget was delivered against the background of extremely difficult global and domestic economic conditions and consequently huge uncertainties about future trends.

These are driven by factors such as low commodity prices, volatile financial markets, low economic and employment growth, a severe drought, electricity-supply shortages, increasing financial pressure on consumers on the back of rising inflation and interest rates, low levels of confidence and speculation of a possible country credit rating downgrade later this year.

In view of these trends, developments and challenges, the Minister had a difficult task in balancing the budget, providing limited tax relief and increasing some taxes in an attempt to boost revenue in an environment where the economy is not performing strongly, while trying to keep expenditure under control. 

The rates and brackets for transfer duty on the sale of property on or after1 March 2016 will remain unchanged on all property acquired up to a value of R2,25 million. Brackets for transfer duty on properties of a value of between R2,25 million and R10 million and above R10 million were introduced. The transfer duty rate on a property of above R10 million will be 13%, which will lead to an increase in transfer duty payable on property transactions above this amount.  

Due to government’s tight fiscal position, no transfer duty relief was given at the lower end of the market, with the exemption threshold unchanged at R750 000, whereas the upper end of the market will have to pay more with regard to this tax.

The maximum value of a property exempted from transfer duty was fixed at R100 000 in 2002/03; R140 000 in 2003/04; R150 000 in 2004/05; R190 000 in 2005/06; R500 000 in 2006/07 to 2010/11; R600 000 in 2011/12 to 2014/15 and R750 000 in 2015/16, with this amount to remain unchanged in 2016/17.  

Berry Everitt, MD of the Chas Everitt International property group says the increases in Capital Gains Tax, Transfer Duty on luxury property and the fuel levy, as well as the introduction of a new tyre tax are obviously much less welcome and will need to be closely monitored in the next few months to see what effect they have on high end property investment and the ability of middle-income households to qualify for new home loans.

“Overall, however, we expect the Budget to have a positive effect on the property market in terms of sustaining housing demand over the next 12 months.”                   

Herschel Jawitz CEO of Jawitz Properties says that the increase in the transfer duty for above R10-million, from 11% to 13%, "amounts to nothing more than a simple wealth tax". "Given the overall size of the budget and the challenges facing the fiscus, the additional revenue raised would barely be noticeable from a residential point of view."

Shaun Rademeyer, CEO of BetterLife Home Loans adds: “This is an indication of how hard the government is looking to scrape every bit of revenue it can from the 'consumer barrel’. If read correctly, the increase would mean an additional R20 000 in transfer duty per R1million above R10- million. At that level, little impact is expected on sales volumes.

Dr Andrew Golding, CE of the Pam Golding Property group says a real upside within the Budget is the assertive stance taken in regard to fiscal consolidation and containment of expenditure, which is reassuring in the light of the imperative to not only stabilise the economy but also demonstrate commitment to both immediate and longer term fiscal prudence, which is critical to investors.

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Last modified on Friday, 11 March 2016 09:53

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