PROPERTY: Wider Scope Now to Transfer Your Property Tax-Free
Recent Kwazulu-Natal Business News
Recent changes to tax legislation mean that even more people can now take advantage of the opportunity to transfer properties that are currently owned by companies, close corporations and trusts into their own names, without incurring any secondary tax on companies, capital gains tax or transfer duty.
The advantage of doing so is that a private owner of a property that is his or her primary residence will qualify for a considerable reduction in CGT liability when the property is sold at a later date, says Berry Everitt, CEO of the Chas Everitt International property group.
“In return, however, the new law provides for the company, CC or trust that previously owned the residence to be terminated or revocated within six months of the transfer. The State hopes in this way to clean up the companies register and increase efficiencies in tax administration.”
Writing in the Property Signposts newsletter, Everitt explains that when the transfer concession was first introduced late last year, it provided for tax-free transfers of fixed residences only directly from companies or close corporations to a natural person, or from a trust directly to a natural person.
“This person had to hold all the shares directly in the company that was transferring the property, either individually or with a spouse. Alternatively, he or she must have donated or financed the residence held by the trust.
“It also provided that the individual to whom the property was being transferred must have personally lived in the residence on a daily basis, and so effectively limited such transfers only to primary residences.”
Now, however, a further amendment has been made to the tax law to enable tax-free transfers from multi-tiered legal structures, for example from a company owned by a trust to a natural person who is the beneficiary of that trust.
“It also now provides,” he notes, “that the residence to be transferred must have been used ‘mainly for domestic purposes’ during the period from 11 February 2009 to 31 December 2012, which is end of the concession period.
“This means that holiday homes owned in companies, CCs and trusts can now also be transferred tax-free to the individual, as long as they have note been rented out more than 50% of the time.
“All this makes the concession much more flexible and accessible. However, before going ahead with such transfers, taxpayers do need to take professional advice as to the likely effect on their overall tax situation in the future.”
Business News Sector Tags: Property|
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