Brackenridge Estate Plettenberg Bay

Trusts, Co or CC - Tax Concessions

2009-10-19T10:44:00.003+02:00

Introduction
There was a time when there were advantages to owning property through a company or a close corporation. Instead of selling the property, one could sell the shares/members interest and loan accounts of the company or close corporation which would mean that the purchaser did not pay transfer duty. This resulted in the purchaser saving large amounts of money and accordingly one could either ask for a higher selling price or sell the “property” easier. However in 2002 legislation was passed in terms of which a company, close corporation or trust which owns residential immoveable property is treated as if it is immoveable property. This designation means that the sale of the trust or the shares or members interest and loan account in such company or close corporation is subject to payment of transfer duty calculated on the value of the immoveable property.

With the introduction of capital gains tax (CGT) in 2001 companies and close corporations were placed at a disadvantage in relation to individuals in that they could not claim the primary rebate (at present R1 500 000.00) provided to individuals on their primary residence. Further the effective rate for capital gains tax payable by a company or close corporation is higher than the rate payable by individuals.A further disadvantage is that when a company or close corporation disposes of its property and proceeds to distribute the profit to its shareholders or members, the company or close corporation pays secondary tax (STC) or dividends tax. Furthermore in terms of the Companies Act of 1973 an annual fee is paid by companies.

In light of the above the owning of residential property through a company or close corporation no longer makes sense. As a result of this more individuals wish to transfer their properties out of their companies into their own name. At present if a company or close corporation were to transfer a property to an individual it would be liable for CGT and STC or Dividends Tax and the individual purchasing the property would pay transfer duty. Now with the passing of the Taxation Laws Amendment Bill of 2009 individuals will from the 1st January 2010 for a period of two years be able to acquire property from their company, close corporation or trust without such entity paying STC or Dividends Tax or CGT. In addition, no transfer duty will be payable. Effectively the liability for the capital gains will roll over to the purchaser i.e. the base cost for the property will be what the base cost would have been for the seller. This will only be applicable when the purchaser sells the property and the purchaser will have the benefit of the primary residence exclusion.

How to qualify
To qualify the Bill requires the following:
1. The property must be the sole asset of the company or close corporation or trust;
2. The property must be a residence used exclusively for domestic purposes. Effectively the property must be your primary residence. Residence includes “any structure including a boat, caravan or mobile home which is used as a place of residence by a natural person, together with any appurtenance belonging thereto and enjoyed therewith”.
3. An interest in a residence must be transferred from a company, close corporation or trust to a natural person.
4. Shares or member’s interest must have been held directly by a natural person alone or together with his/her spouse or by a trust.
5. Period – The company, close corporation or trust must have owned the property on or before 11 February 2009 and must distribute the property between 1 January 2010 and 31 December 2011.

Application of the Bill does not apply
The Bill will not apply where:
1. The company has more than one shareholder or the close corporation has more than one member;
2. The company or close corporation owns more than one property;3. Where the shareholder of a company is not a natural person or trust but a legal entity

Trusts as shareholders of company
Originally the Bill did not cater for residences owned by companies which in turn were owned by a trust. However the concession now also extends to trusts. Consequently the Act provides that a company which owns a residence and whose shares are held by a trust may distribute the property to the individuals who are the beneficiaries of the trust without adverse tax consequences.AdvantagesAt present a company or close corporation pays STC and CGT without any primary rebate and the purchaser pays transfer duty.

Now if the property qualifies for the concession the seller will have the benefit of not paying the following:

CGT – The seller will not pay CGT on the transfer of the property to the individual natural person. However the individual is not exempt from CGT. The CGT that would have been paid by company is effectively transferred and rolled over to the individual who takes the transfer of the property. Thus the individual will ultimately become liable to pay CGT on the sale of the property. However if the individual maintains the property as his/her primary residence he/she will now have the benefit of the primary rebate of R1 500 000.00 provided for CGT.

STC – On the sale of the property the company or close corporation would distribute the profits to its shareholders. Such award would constitute dividend for STC purposes. Under the amendment the individual will not be liable for STC.

Transfer Duty – Prior to the passing of the Bill the purchaser would be liable for transfer duty on the sale of the property. If the transfer of the property is done within the period there will be no transfer duty payable on the transaction.DisadvantagesAlthough the concession is very generous there is a disadvantage in respect of properties that are owned by trusts. Once the property is transferred into the beneficiaries own names their personal estate is increased which results in an increase of their estate for estate duty purposes thus undermining the objective of creating a trust.

Cost involved
The purchaser will still incur other ordinary costs of transfer such as conveyancing fees. Since there would be no purchase price the calculation of fees would likely to be based on the municipal value of the property. If the property was mortgaged to secure a loan the shareholder or member would need to discharge the loan and pay for the bond cancellation. The purchaser could apply for a new loan to be secured by the registering of a mortgage bond against the Title Deeds of the property. The cost of registering such bond would also be borne by the shareholder or member.

Information supplied by Dykes van Heerden, Attorneys
E-mail: info@dykedsvanheerden.co.za
Web: http://www.dykesvanheerden.co.za/

Chas Everitt Introduces Unique Fly 'n Buy Package

2009-09-07T18:06:00.004+02:00

Chas Everitt International Property Plettenberg Bay has introduced a unique Fly 'n Buy package for serious buyers wishing to purchase Plettenberg Bay property. This unique offer results in Chas Everitt reimbursing buyers for airfares, accommodation and car rental. The package conditions are available on Chas Everitt's websites such as http://www.everitt-plett.co.za/, http://www.brackenridgeproperty.co.za/ and http://www.goosevalleygolf.com/. Simply click on the Fly 'n Buy logo in these websites and the PDF document will open providing full details of the qualifying procedure and applicable conditions.

John Fuller, Principal of Chas Everitt Plettenberg Bay says that although only just launched several buyers have already decided to make use of the offer. John says that even in tough market conditions estate agents need to be innovative to ensure that they proactively grow market share, and this offer ensures that our sellers improve their chances of selling their homes as quickly as possible. The Fly 'n Buy trademark is in the process of registration, thus ensuring that this unique offering is exclusive to the Chas Everitt Group.

Huge Tax Break On Properties

2009-08-08T04:06:00.003+02:00

Monique Vanek
27 July 2009

What you should know to transfer your property out of a company and get a 22% tax saving.

Seldom does the South African Revenue Service (Sars) open a tax-free window period, and rarely does it do it twice. So when it announced in a June draft amendment that individuals who own their primary residence in either a company, or a closed corporation (CC) can transfer their property tax free into their own name for the second time it came as a surprise and should be taken advantage of.

The draft amendment is likely to be finalised in the next few weeks, here's the lowdown.
All individuals who own their primary residence in either a company or CC can transfer their property into their own name without having to pay capital gains tax (CGT), transfer duty and secondary tax on companies (STC) from January 1 2010 until December 31 2012. This is a huge tax saving of just under 22%.

They can only do this if their domestic residence is exclusively used for domestic purposes, says Mike Teuchert, a tax partner at Grant Thornton. However, "no clarification has been given to the meaning of the term domestic purposes, although it would exclude the situation where a person also uses their residence for the purposes of running a part-time small business", says Teuchert.

Unfortunately the exemption does not apply to those who own their primary residence in a trust, as was the case in the previous window period, however this could change in the final draft, notes Deborah Tickle, a member of Saica's National Tax Committee.

Also if the property is not in your own name you can not take advantage of the exemption.
For those who transferred their properties out of a CC, or company after the 2001 window period and before this new one starts you will not be reimbursed, says Tickle.
Of course this exercise is not without costs, says Teuchert. You will still be responsible for costs associated with the transfer of you property, such as conveyancing fees and bond cancellation costs, reckons Teuchert.

So how do you go about transferring your property out of your CC or company? Firstly, you'll have to visit a conveyancing attorney to transfer your property, cancel your bond and register it in your own name. Secondly, you will need to make sure your books are in order and close them off. Thirdly, you will have to fill in a tax return and supply Sars with your latest set of accounts. Finally you will need to deregister your company with the Register of Companies, says Tickle.
Ntombikayise Baepi a senior associate at ENS reckons Sars has provided this second window period to cleanse the Register of Companies of inactive and dormant companies. Tickle says it has also done so to help individuals avoid the high costs of being a registered company when the Companies Act comes into full force next year.

The best way to sell your property

2009-08-01T11:59:00.001+02:00

Isn't it interesting how in these times we read that the best way to sell a property is by public tender or auction? The truth is that in a Buyers' Market it is only bargain hunters who attend auctions or submit tenders. Quite simply, they are the investors with cash and are looking for bargains. Auctions and tenders will only realise decent prices if the seller has a unique one of a kind property, such as the last piece of prime beachfront land.

I'll let you into a secret. The ONLY factor that sells property is PRICE! Price is relative to position, location, condition, age and other similar factors. If your property has not sold in the current market IT IS OVERPRICED. A few years ago there may have been 50 buyers in any month looking for property like yours. Today there are 20 buyers and they are comparing prices of all similar properties. If your property is overpriced it is compared to lower priced properties and those are the ones that are selling.

So, if you need to sell now, listen to a reputable Estate Agent and price your property competitively to sell in the current market. Estate Agents are not motivated to sell overpriced properties, but overpriced properties do fortuitously help them sell the better priced ones!

So what is the best solution? Deal with a reputable Estate Agent with a proven record of sales in your area, grant them a Sole Mandate and ensure that you receive a written marketing plan for your property. Make sure the mandate can be cancelled should the Agent not implement the marketing plan! Your Agent will then work hard on marketing the property, and spend money doing so, and is unlikely to accept a Sole Mandate appointment if the price is not market related.

Plettenberg Bay's Brackenridge Estate leads the way with penalty levy moratorium

2009-07-28T18:29:00.008+02:00

John Fuller, Principal of Chas Everitt International Property in Plettenberg Bay says that the Brackenridge Homeowners Association in consultation with the Developers have taken a bold decision to provide a two year building moratorium to buyers of vacant stands in Brackenridge Estate. Brackenridge is one of Plett's most exclusive and secure residential estate developments. He says it is a commendable move that will hopefully attract more buyers to Brackenridge.

Brackenridge Estate has sold very well and approximately eighty new homes have already been built, but the original deed of sale provided for penalty levies if houses were not built within a required time frame. These penalties were implemented against many owners, but for 2009 (expiring in February 2010) a moratorium on penalty levies was granted to assist owners during the current economic crisis.

Fuller said that while this moratorium assisted existing investors, it affected the interest of potential new buyers who require clarity regarding the imposition of penalties beyond 2008. He said that as an estate agent he had made suggestions to the Homeowners' Association and he hoped that other developers would realise that the secondary residential property market had changed forever and it could be a very long time before a sellers' market is seen again. If bold decisions were not taken to encourage buyer interest, demand would decline further, negatively affecting the value of all properties in the developments. Brackenridge's decision will therefore hopefully increase demand for stands in the development from serious buyers, help to underpin declining stand prices and also boost construction activities on the Estate.

The communique from the Chairman of the Brackenridge Homeowners' Association states:

"In order to facilitate potential new sales of stands in Brackenridge it has been agreed in principle, (subject to periodic review) by the Developer, after due consultation with ourselves to introduce the following with immediate effect:

1. A Moratorium on Penalty Levies will be granted to all new individual buyers of stands in Brackenridge for a period of 2 years from the date of the conclusion of the Sale Agreement.

2. This moratorium is to be granted to buyers who have a genuine intention of buying to build and is designed to facilitate the process of Architectural Planning, BARC and Council plan approvals, appointment of Building Contractors and arranging appropriate funding.

3. Should building not begin within the 2 year time frame the normal 5 time penalty levies will apply.

4. Should the property be resold the new buyer will only assume the remaining term of the two years still to run.

This moratorium will be introduced with immediate effect and is unrelated to the existing General Penalty Levy Moratorium currently in place which expires on the 28th of February 2010".

Fuller says that superb 1500 square metre stands at Brackenridge are the best bargains in Plettenberg Bay with some resale prices having dropped as low as R400 000. He says such entry level prices are ridiculously cheap in an estate that is probably Plett's best residential housing estate development and anyone seriously considering building a home in Plett should place Brackenridge at the top of their list.

For Further information or to purchase property at Brackenridge please contact Zelda Kruger on +27 (0)82 320 0664, email her at zeldak@everitt.co.za, or go to http://www.brackenridgeproperty.co.za/ or http://www.everitt-plett.co.za/

New Electrical Regulations

2009-07-17T11:42:00.002+02:00

The Government has promulgated the new Electrical Regulations 2009 which repeals the old 1992 regulations. The old Certificate of Compliance (COC) has been replaced with the Electrical Certificate of Compliance (ECC). The new regulations affect owners in the following way:

Whereas the old COC was valid indefinitely as long as the owner had not made any electrical alterations to the premises, the new regulation provides that the new ECC will only be valid for a period of two years. Sellers will therefore have to provide Buyers with a new ECC where the certificate is older than two years.
Transfer cannot be effected without a valid ECC.
The new regulations became effective from 1 May 2009

Cost Effective Home Insurance

2009-07-16T12:04:00.003+02:00

The cost of home owners insurance through banks was for a long time prohibitive compared with market related policies. Owners with mortgage bonds had no alternative as they were compelled to accept the banks' high premiums. However, changes in legislation two years ago allowed mortgagees to source comparable insurance cover in the open market. Despite this, many owners are still unaware that they have a choice. Many also fail to address the the opportunity as the premium cost is conveniently debited to their mortgage bond balance annually and is hardly noticed.

John Fuller, owner of Chas Everitt International Property in Plettenberg Bay says he was one of the first people to take advantage of the new legislation and approached Lincoln Myburgh of the Insurance and Investment Shop to provide an alternative quote. The result was that the bank's insurance policy was replaced with exactly the same cover through the same underwriter with the annual insurance premium dropping from R7500 to R2800!

Lincoln has since expanded his offerring further with the implementation of Group Schemes at even more preferential rates for owners living in secure gated communities. The result is that 32 Brackenridge owners of the 80 who have already completed their homes have now joined the group scheme. The scheme has saved residents up to 35% of their current premiums. And with the total value of the homes exceeding R100,000,000 the rate has been reduced to .075% of the value of the home. For example, for a home valued at R3,000,000 the premium will be R2,250 per annum. The premium is payable monthly and is added on to the owner's monthly levy statement.

If you wish to avail yourself of this wonderful facility please contact Lincoln Myburgh on Tel: 044 53 1245, Fax: 044 533 4782, or E-mail: lmyburgh@global.co.za

Chas Everitt - Wetherlys Discount

2009-07-14T16:39:00.001+02:00

Chas Everitt International Property Plettenberg Bay has arranged a special 5% discount for any homeowner wishing to purchase goods from Wetherlys furniture stores. This discount is obtainable nationally from any Wetherlys store.

All you need to do to obtain your discount is quote our Account Number to your local Wetherlys store when purchasing. Its as simple as that!

E-mail our Office Coordinator Tracey Clague at plett@everitt.co.za or call her on +27(0)44 533 5250 for the Account Number. This service is absolutely free to you from Chas Everitt.

Please also remember that Wetherlys not only provides the widest range of furniture in South Africa, but that they will also quote you on furnishing your entire home, including all furniture, linen, curtains and accessories, all at most competitive prices. Please ask your local store to visit your home should you require their decorating service.

Conveyancing Fees Increase

2009-07-14T15:44:00.000+02:00

Without any fanfare or notification to the market Conveyancing Fees were increased by 25% from 1 July 2009. For the registration of a property for R500 000 the increase amounts to R1 500, increasing from R6000 to R7 500. A R4 000 000 home will now cost R27 500 instead of R22 000. The fee for postage and petties has increased in all cases from R400 to R450.

Attorneys say that the increase is the first that they have received in seven years.