Dad wants to buy me a townhouse - tax?

[Elon]

Hi all,

So my dad got retrenched last year and wants to allocate some of his severance package to buying me a townhouse. If it goes on my name is there anything we need to know about tax implications?

Thanks!

 

[R13...]

You or him will have to pay donations tax.

 

[LCBXX]

Hi all,

So my dad got retrenched last year and wants to allocate some of his severance package to buying me a townhouse. If it goes on my name is there anything we need to know about tax implications?

Thanks!

It's best to get financial/tax advice from a qualified financial advisor. Not this forum.

 

[AchmatK]

He could buy it and then sell it to you at a market related price. He can then write off R100k per year from what you owe him for the place as a donation until the full value has been donated.

If your mom is still around they could buy it together and sell it to you and then each of them can write off R100k as a donation to you reducing the time to have the full value donated.

 

[Paul Kemp]

• Donations tax is levied at a flat rate of 20% on the cumulative value of property donated not exceeding R30 million, and at a rate of 25% on the cumulative value exceeding R30 million.
• The first R100 000 of property donated in each year by a natural person is exempt from donations tax
• In the case of a taxpayer who is not a natural person, the exempt donations are limited to casual gifts not exceeding R10 000 per annum in total
Dispositions between spouses, South African group companies and donations to certain public benefit organisations, are exempt from donations tax.

 

[zerocool2009]

A really silly question.... cant I buy someone a house, pay all duties.... taxes ... you name it (as simple and easy as that)

Or is the question rather, who sources the funds?

 

[Elon]

He could buy it and then sell it to you at a market related price. He can then write off R100k per year from what you owe him for the place as a donation until the full value has been donated.

If your mom is still around they could buy it together and sell it to you and then each of them can write off R100k as a donation to you reducing the time to have the full value donated.

This seems like the best way to do it, thank you!

 

[rustypup]

It's best to get financial/tax advice from a qualified financial advisor. Not this forum.

Especially given recent changes in the law where SARS is looking to criminalise everyone. For any deviation, whatsoever. Because reasons

 

[Polymathic]

I've been snooping around property 24s deeds info in my area and found that there are a lot of houses should for next to nothing.

Perhaps your father buy the property and then a couple years down the line you buy it off him for a tiny fee.

Consult with a tax advisor to see if this loophole still exists

 

[Blue Shirt]

He could buy it and then sell it to you at a market related price. He can then write off R100k per year from what you owe him for the place as a donation until the full value has been donated.

If your mom is still around they could buy it together and sell it to you and then each of them can write off R100k as a donation to you reducing the time to have the full value donated.

That would just attract transfer duties twice and is completely inefficient.

Your dad could just lend you the money to buy it outright in your name. You then "repay" him on paper without actual cash changing hands. Your dad then donates R100k per year of the outstanding loan balance to you, thereby reducing the loan every year until zero.

You dad will be liable to pay tax on the nominal interest that accrues on the loan. If the loan is tax-free, you will be liable for tax on the benefit of the interest-free loan.

Both options will be vastly better than paying transfer duties and lawyer fees twice by doing the buying and re-selling thing.

 

[MrGray]

I've been snooping around property 24s deeds info in my area and found that there are a lot of houses should for next to nothing.

Perhaps your father buy the property and then a couple years down the line you buy it off him for a tiny fee.

Consult with a tax advisor to see if this loophole still exists

For all tax purposes SARS will use the market value if the transaction value is obviously understated.

 

[deweyzeph]

That would just attract transfer duties twice and is completely inefficient.

Your dad could just lend you the money to buy it outright in your name. You then "repay" him on paper without actual cash changing hands. Your dad then donates R100k per year of the outstanding loan balance to you, thereby reducing the loan every year until zero.

You dad will be liable to pay tax on the nominal interest that accrues on the loan. If the loan is tax-free, you will be liable for tax on the benefit of the interest-free loan.

Both options will be vastly better than paying transfer duties and lawyer fees twice by doing the buying and re-selling thing.

You're confusing employer loans to employees where a fringe benefit acrues to the employee if the loan is interest free or the interest charged is below SARS's offical rate of interest. No such benefit acrues on interest-free loans between individuals. The bigger risk to the person receiving the loan is that if their dad dies before the loan is paid off or written off then their dad's estate will call in the loan, putting the receiver of the loan in a precarious financial position.

 

[Rocket-Boy]

I've been snooping around property 24s deeds info in my area and found that there are a lot of houses should for next to nothing.

Perhaps your father buy the property and then a couple years down the line you buy it off him for a tiny fee.

Consult with a tax advisor to see if this loophole still exists

You cant do that anyone. A friend of mine bought his parents house and they had to get official valuations etc and jump through lots of hoops for sars.
With all the taxpayers leaving they are desperate to pilfer any money they can.

 

[deweyzeph]

You cant do that anyone. A friend of mine bought his parents house and they had to get official valuations etc and jump through lots of hoops for sars.
With all the taxpayers leaving they are desperate to pilfer any money they can.

If you "give" a house to someone you actually get nailed twice by SARS. SARS will nail the donor of the house for 20% donations tax AND they will nail the donor for deemed capital gains tax based on the market value of the house.

 

[ScottulusMaximus]

If you "give" a house to someone you actually get nailed twice by SARS. SARS will nail the donor of the house for 20% donations tax AND they will nail the donor for deemed capital gains tax based on the market value of the house.

Presumably you mean donee in the second bit? CGT does not apply to primary residences.

Would "just" be the 20% donation tax that dad would have to pay.

 

[deweyzeph]

Presumably you mean donee in the second bit? CGT does not apply to primary residences.

Would "just" be the 20% donation tax that dad would have to pay.

No, I mean the donor or seller. CGT does apply to primary residences, it's just that that the first R2 million is excluded. If you bought your house some time ago it's perfectly possible to be liable for quite a substantial amount of CGT on your primary residence, regardless of the exemption.

 

[WesleyDB]

Just to clear something up, he wouldn't be able to claim that as a donation, you can only claim a donation as a tax deductible if you donating to a registered npo and are issued a section 18A certificate from that organisation.

 

[deweyzeph]

Just to clear something up, he wouldn't be able to claim that as a donation, you can only claim a donation as a tax deductible if you donating to a registered npo and are issued a section 18A certificate from that organisation.

We're not talking about tax-deductible donations here. That's a completely different aspect of donations. We're talking about the liability that a person who donates a large asset to another person has towards SARS in terms of donations tax.

 

[WalkWithMe]

Trust may be the option here, depends on the value of said town house. Best to speak to an advisor

 

[neoprema]

Can your father not call it a loan with repayment given to you with a contract? Instead of a donation? Paid-back at say 1% interest over 235 years?

As mentioned though best to seek professional advise as SARS is clamping down on anyone who wants to do something above board and better their life.