The increase in the interest income exemption for individuals will allow investors to receive higher tax-free income from listed property, says Association of Property Unit Trusts spokesman James Templeton.

In his budget speech last week Finance Minister Trevor Manuel announced an increase in the tax exemption for interest income for individuals under 65 from R11 000 to R15 000 a year.

With forward yields on listed property averaging about 10%, all investors can get tax-free income on investments on investments of up to R150 000 in listed property, says Templeton.

But those over 65 will be receiving a bigger break, as their tax exemption on interest income will be increased from R16 000 to R22 000 a year.

In addition, the raising of the tax threshold of those over 65 means that the amount of income they will be able to receive before falling into the tax net rises to R60 000. Templeton says this is good news for retired people who rely on income-generating investments rather than capital growth.

He says listed property offers the highest income yield of the three traditional income asset classes of bonds, property and cash, and the income yield is forecast to rise 4%-5% over the next 12 months, making listed property a very attractive investment to pensioners looking for higher income-yielding investments.

He says that at the same time the economic fundamentals for commercial and industrial property are very positive and, apart from receiving high real income returns, investors in listed property could also have the added advantage of capital gains on their investments.

Business Day

Publisher: Business Day
Source: Inet Bridge