SARS: Declare or else!

Have you been declaring the rental income received on your investment properties? Non-declaration of rentals received — after deducting the appropriate expenditure — is a contravention of the Income Tax Act.

With the constant improvements in the efficiency of tax collections by the South African Revenue Service (SARS), it is very likely that such non-declarations will be detected, says Paul Nelson, director of Johannesburg-based auditing firm Nelson Financial.

Sars requires landlords to draw up financial statements declaring the profits made on any rented property. If several properties are let by the same landlord, these statements can be consolidated.

Writing in the Property Signposts newsletter, Nelson notes that any expense actually incurred in relation to the letting of the property or properties may be noted in the statements and deducted from the gross rental when determining the taxable profit.

Such expenses are typically interest paid on the bond, assessment rates, costs of repairing and maintaining the property, insurance paid on the property and any levies paid (sectional title and home owners' associations).

"The Act generally allows for revised assessments to be issued for three years after an assessment is issued. However, where income has actually been omitted this three-year period does not apply allowing Sars to re-open any year of assessment for which income has been omitted," he says.

"And if you have not declared your rental income in past periods it is advisable to approach SARS and settle the matter rather than to adopt the wait-and-see approach. This will save you worry and perhaps the cost of paying the additional taxes and interest that SARS can impose.

"It is recommended, though, that you make use of the services of a reputable tax consultant or accountant to approach Sars on your behalf — and to ensure that the net rental income received is properly calculated and disclosed in your current tax return."

Article from: www.iafrica.com