You have to share your rent with SARS

If you own one or more rental properties, the SA Revenue Service (SARS) requires you to draw up financial statements showing your expenses and profits in relation to these properties – and to pay tax on your profits.

Many private landlords don’t know this and believe they can just pocket whatever rent they receive without reference to SARS, but RentalsDOTCom, the rental property management division of Harcourts Africa, advises that this is actually a contravention of the Income Tax Act.

“If a rental property is in your name,” notes CEO Martin Schultheiss, “the rental received actually forms part of your income and must be declared to the Receiver, or you could find yourself in very hot water.”

On the other hand, there are certain expenses incurred in the letting of property that can be deducted from the gross rental to determine the actual profit – and reduce the amount of tax payable.

These expenses typically include the interest paid on the bond, municipal rates, the cost of any repairs and of maintaining the property, the premiums paid to insure the property and any sectional title or estate levies paid.

Schultheiss also says that if you haven’t declared your rental income in past tax periods, “it is really advisable to approach SARS and ‘come clean’ rather than waiting to see whether – or rather when - you will be found out. Taking the direct approach may even result in a reduction of the penalties and interest that SARS can impose on unpaid taxes.

“We do recommend, though, that you get an accountant or a reputable tax consultant to help you clear things up, or even to approach SARS on your behalf, and then ensure that your net rental income is properly calculated and disclosed in future tax returns.”

Article by: www.harcourts.co.za