Often encouraged by stories of very high rentals, a surprisingly large number of South Africans are apparently now willing to let out their homes over the World Cup period, says Grant Gunston, senior director of Grant Gunston Inc – but, he warns, they must be prepared to declare this income to SARS.

“If they do not, they will have to live with the knowledge that they have been dishonest. They also risk significant penalties. Although this is a one-off payment it should not be hidden from the taxman,” said Gunston.

Letting out your primary residence for this momentous period in SA’s history, he added, could just conceivably lead SARS to query whether your home is now being used as a business (i.e. an income generator). This, in turn, could conceivably result when you sell, in the first R1,5 million profit on capital gains tax, which by law is exempt from tax (if it is the owner’s primary residence) being reassessed tax wise.

“The good news,” said Gunston, “is that the tax experts we have consulted agree that this will almost certainly not happen – provided it does not then become a regular practice. SARS’ attitude appears to be that a one-off World Cup windfall will not affect the capital gains tax relief enjoyed by individuals in respect of their primary residence.”

Gunston warned, however, that those collecting a big rental windfall may find that SARS investigates their tax accounts in some detail and may well uncover other revenues or perks previously thought to be not worth paying attention to. It is therefore important for honest tax payers to keep thorough records of all their income generating activities so that they can answer any queries.

The growing number of granny flats or portions of a primary residence, he added, do affect the home’s tax exemption status.

“Generally the floor area rented is measured and calculated as a percentage of the whole property floor area, e.g. 15 or 20%. This percentage is then deducted from the R1,5 million capital gains tax exemption.”

Gunston added that those renting out over this period should secure a healthy upfront deposit as well as the full rental in case the tenant damages property.

Article by: www.grantgunston.co.za