Tax laws a gold mine for developers

Posted On Friday, 19 April 2002 10:31 Published by eProp Commercial Property News
Rate this item
(0 votes)

SA's tax laws contain a number of benefits for taxpayers planning to develop property.

Infrastructure IndustrySA's tax laws contain a number of benefits for taxpayers planning to develop property.

However, should taxpayers fail to pay sufficient attention to detailed requirements they may find themselves in hot water.

Ernst & Young tax partner David Clegg said tax planning plays an important part in property development. Clegg said the laws provided special allowances for property dealers or developers.

Clegg was speaking at the annual Butterworths property tax seminar in Sandton yesterday.

He said the laws had a 'few nuggets by way of definitions that could be turned into veritable gold mines, but insufficient attention to detailed requirements could prove disastrous'.

Clegg said the allowance for industrial buildings had changed over the years. Before a property investor could claim an allowance for a new building, such a building would have to be erected by or bought from a qualified engineer, he said.

The laws also stated that the building would have to be used either by the owner or the tenant. It would also have to be used either by the owner or the tenant for a 'process of manufacture'.

Clegg said the allowance rate would depend on the date the building was erected.

He said if the erection commenced prior to July 1 1996 or after September 30 1999 the investor would be entitled to claim a 5% allowance.

However, if the erection commenced after July 1 1996 and was completed before March 31 2000 the investor would be entitled to a 10% allowance.

Clegg said it was important that the architect 'got the design right upfront'.

He said tax planning opportunities were also presented by the granting of initial and annual allowances on certain residential housing projects.

A taxpayer would be entitled to an initial allowance of 10% of the cost of a residential unit erected as a 'housing project'.

Clegg said a housing project would include 'any project consisting of at least five residential units'. He said the residential units need not be close in geographical proximity. However, where the units were geographically spread, 'it would be advisable to obtain an advance ruling on the matter,' Clegg said.

He said a taxpayer would be entitled to an annual 2% allowance of the cost of the residential unit. The allowance would be granted in the first year in which the first allowance came.

Clegg said the laws provided a 5% annual allowance on the cost of an erection of a new hotel or an improvement to such buildings. There was also a 20% allowance on the cost of refurbishments which did not extend to the existing exterior of the building.

He said the allowance was available to hoteliers who carried the costs themselves. It was also available to lessors whose tenants used the building for the purposes of their trade as hotel keepers. Clegg said the allowance could not be claimed by a purchaser.

 

Last modified on Tuesday, 05 November 2013 20:24

Please publish modules in offcanvas position.