Body Corp Question ...

zerocool2009

zerocool2009

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Lets say the BC have a nice big reserve fund, and pay R250 000 to sars per year (for interest earned)

Cant the BC do better things with that money (rather to pay SARS) ?

1) Cant the BC buy apartments and rent it out (but then it is again rental income)
2) Maybe buy shares ?
 
Buy solar panels for every unit.

I mean, it's not gonna help with tax but that's what I would want from them.
 
zerocool2009 said:
Lets say the BC have a nice big reserve fund, and pay R250 000 to sars per year (for interest earned)

Cant the BC do better things with that money (rather to pay SARS) ?

1) Cant the BC buy apartments and rent it out (but then it is again rental income)
2) Maybe buy shares ?
Click to expand...
Depends, why such a large reserve? If it's within the law, you can't touch it. Otherwise it should be used to improve the common property. If it's still too much, then your levies are way over.
 
Its a monster of an estate. I must honestly say, it aint bad that we have so much savings, but the SARS leg is putting me off big time :(

I cant really say our levels are to high. If we have a paint project, it cost roughly R7 000 000
 
They could, but when things go wrong they take all the blame and ain't nobody got time for that - far too much risk. And also, those funds need to be liquid in the event that shit hits the fan and costs need to be covered.
 
zerocool2009 said:
Lets say the BC have a nice big reserve fund, and pay R250 000 to sars per year (for interest earned)

Cant the BC do better things with that money (rather to pay SARS) ?

1) Cant the BC buy apartments and rent it out (but then it is again rental income)
2) Maybe buy shares ?
Click to expand...

Creating more money for more taxable income? They can invest but they’ll still realise a tax bill at some stage. Plus the reserve is there and should be available for its purpose which limits options too. I also would guess that with a large tax bill they have a competent tax firm or practitioner that ensures taxation is legally as minimal as possible.
 
zerocool2009 said:
Its a monster of an estate. I must honestly say, it aint bad that we have so much savings, but the SARS leg is putting me off big time :(

I cant really say our levels are to high. If we have a paint project, it cost roughly R7 000 000
Click to expand...
If the reserve is at the point of minimum by law, you can't do anything. But i think consult with a good accountant as it seems unfair to pay large tax if the reserve is mandatory although i suspect is only on the interest soooo.. Yah. That big money should be handled by some ca firm so they should be able you advise.
 
zerocool2009 said:
Lets say the BC have a nice big reserve fund, and pay R250 000 to sars per year (for interest earned)

Cant the BC do better things with that money (rather to pay SARS) ?

1) Cant the BC buy apartments and rent it out (but then it is again rental income)
2) Maybe buy shares ?
Click to expand...

Yes to the extent the reserve doesn't need to be drawn on in the next year or two it should probably be invested in capital assets not cash surely.
 
You are the body corporate as an owner. Gather the rest of the owners and make a plan.
 
Short answer is probably no.

Body Corporates are limited in what they are allowed to do with extra money and anything to the contrary would most likely require a unanimous resolution (read: impossible resolution).
 
To pay that amount as interest tax the amount if reserves must be unfathomable
 
there's something wrong there.
the reserve fund is to fund long term maintenance / improvement projects linked to the 10yr maintenance plan.
that money is sitting in the wrong place under incorrect budget allocation.

be that as it may, the trustees can place the funds in a call account which will provide higher interest rate.
given sars is paid once per year, the funds can be placed in a 9 month call account with 50% liquidity (without penalty) on 30 days notice.
 
Grant said:
there's something wrong there.
the reserve fund is to fund long term maintenance / improvement projects linked to the 10yr maintenance plan.
that money is sitting in the wrong place under incorrect budget allocation.

be that as it may, the trustees can place the funds in a call account which will provide higher interest rate.
given sars is paid once per year, the funds can be placed in a 9 month call account with 50% liquidity (without penalty) on 30 days notice.
Click to expand...

That is exactly where it is. The issue is the SARS leg of things. any interest past the normal allowed is taxed ! :(
 
zerocool2009 said:
That is exactly where it is. The issue is the SARS leg of things. any interest past the normal allowed is taxed ! :(
Click to expand...
I am no expert so forgive me if my reasoning is flawed.
The Body Corporate is registered as a business, correct? If that is correct then any money spent on adding value to the complex will be tax deductible and therefore could be written off against the tax being paid.
So they could spend R10m on installing insulation into all the units to bring down energy costs. Things like that.
But then I could be wrong about the legal entity status of a BC.
 
The only thing I can find so far is that the first R50 000 is tax free (if it is saved in an interest bearing account).
 
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