Taxman eyes 2010 profit

2009-12-19 00:00

PRETORIA — People wanting to profit from the World Cup soccer tournament by letting their property to foreigners need to think carefully.

The South African Revenue Ser­vice (SARS) could claim up to 40% of such windfalls. That’s not to mention the additional costs of insurance or provision for personal liability cover.

According to David Warneke, a tax partner at Cameron & Prentice in Cape Town, one rental agency is insisting on R50 million worth of personal liability insurance before properties can be let.

He points out that if a foreign visitor should slip on your tiles and hurt himself, claims could start with hospital costs and go on to include psychological treatment.

The rental income has to be declared to SARS. People being taxed at a marginal rate of 40% on their gross income will have to do their own calculations as to whether the additional risks make it worthwhile.

There is little comfort in knowing that all expenses incurred in earning this income are tax-deductible.

Such expenses include commission payable to rental agents, interest on the bond, electricity, water and services fees or levies payable over the period of the lease. According to Warneke, even cleaning ser­vice expenses can be included.

A Pretoria short-term insurer says it has not yet received many inqui­ries about 2010. But some insurers have recognised this gap in the market and are offering additional cover, including “comprehensive insu­rance on household contents” and “stand-alone liability cover”. It is being categorised as one-off cover for 2010 and is added to owners’ or existing policies.

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