General Tax queries

[Stefanmuller]

you can only claim interest on bond from the time the bond went into your name.

If he owned the property and if he was paying the bond, even though the bond was not registered in his name, the interest can still qualify as a deductable expense if he can prove that he paid said interest or paid the bond in order to make taxable income (or to have full use of the property in his favour to rent out). Whether the bond is in his name or in his parents name, he is paying it just as if it was in his name and the bond payment still carries a interest portion. Effectively he is borrowing the money from his parents which in turn is borrowing it from the bank at the same interest rate. I think he should be able to argue this as in the end the property was in the process of being transferred to his name, so in the end he owns it. In the mean time he had to pay the bond to use the property as he likes (renting out). So by paying the bond he was "buying" the property or doing so to own it or to have use of it. Thus, the source of the funds is not important, but what it is used for.

What you can't do is take an advance on your bond to pay studies or go on holiday or pay for medical bills and then deduct the increased interest against your rental income. So the funds from the bond must have been used to buy, improve, renovate, or repair the property or for expenses relating to the business of renting.

Not sure if the fact that he did not own the property changes anything - you don't often see someone renting out a property that he does not own or does not sublet as per rental contract. But on the other hand I can fully understand the situation he is in, and as a matter of fact he does not seem to be in any advantage over a person owning as he still pays the same and have full use.
Question: For the first part of the year he did not in fact own the property. Usually you need to own an asset to claim the expenses relating to it. In this case he is paying to have full usage of the property - so then he should also be able to deduct the expenses. Only thing is, is his bond payment to his parents then seen as payment for full usage (as in rent Rent - thus fully deductable) or can full use be seen as an asset (Capital) as in the case of owning (thus only rent portion deductable). Obviously if it is rent, then it has to be fully declared on the parent's side. Interesting.

 

[Greg C]

If he owned the property and if he was paying the bond, even though the bond was not registered in his name, the interest can still qualify as a deductable expense if he can prove that he paid said interest or paid the bond in order to make taxable income (or to have full use of the property in his favour to rent out). Whether the bond is in his name or in his parents name, he is paying it just as if it was in his name and the bond payment still carries a interest portion. Effectively he is borrowing the money from his parents which in turn is borrowing it from the bank at the same interest rate. I think he should be able to argue this as in the end the property was in the process of being transferred to his name, so in the end he owns it. In the mean time he had to pay the bond to use the property as he likes (renting out). So by paying the bond he was "buying" the property or doing so to own it or to have use of it. Thus, the source of the funds is not important, but what it is used for.

What you can't do is take an advance on your bond to pay studies or go on holiday or pay for medical bills and then deduct the increased interest against your rental income. So the funds from the bond must have been used to buy, improve, renovate, or repair the property or for expenses relating to the business of renting.

Not sure if the fact that he did not own the property changes anything - you don't often see someone renting out a property that he does not own or does not sublet as per rental contract. But on the other hand I can fully understand the situation he is in, and as a matter of fact he does not seem to be in any advantage over a person owning as he still pays the same and have full use.
Question: For the first part of the year he did not in fact own the property. Usually you need to own an asset to claim the expenses relating to it. In this case he is paying to have full usage of the property - so then he should also be able to deduct the expenses. Only thing is, is his bond payment to his parents then seen as payment for full usage (as in rent Rent - thus fully deductable) or can full use be seen as an asset (Capital) as in the case of owning (thus only rent portion deductable). Obviously if it is rent, then it has to be fully declared on the parent's side. Interesting.

Well lets put you in the banks shoe quickly or for that matter an insurer.
Like many households in South africa,loving parents purchase a vehicle and give it to their children but dont always diclose or nominate properly who the main driver of the vehicle will be as they are aware that if they name their children ,a higher premium will be paid which IS FAIR because of the risk.Same goes with the bank.

So yes in fact it is important for who the bonds name is in because if not the risk is not correctly adjusted for.His parents may be taking his bond repayments and passing it along,but what if they relied upon it and he defaults.There will be huge reprecussions as the bond was given to them under the premise that they can repay it.

Clear cut its not normal its LAW that in order to claim the expenses he must own the building.If he leases it then relevent lease expenses etc will relate but it will be a formal agreement that SARS will be informed of.


QUOTE In this case he is paying to have full usage of the property - so then he should also be able to deduct the expenses.
I like the idea of allowing transfer costs when its in his name but to have the use of it during this process...There are huge ramifications here.
By merely having the use of the asset during the period of transfer he can do as he pleases but actually NEVER pass the final ownership on ie delay and delay the transfer but in the end deciding not to OWN the asset but he got full use of it during the period he was attempting to transfer.Im sorry but this is a crazy thought.

I am completely with SARS on this one.I stick with what is and written by the ACT that if you do not own the asset you do not get the benefits, The costs in between are difficult in attempting to get it into your name and can be hotly debated but the fact remains he DOES NOT OWN IT,he should not get the benefits.

It just sets to many possibilities for further problems obviously.
Person pays you rent(not formally) says he has and should get the benefit of the Place,
If you owned the place and declined him but he still gets full use?Wouldnt you be a tad peeved?

SARS does tax for everyone not clauses and differences for connected persons and family members.
I am agreeing with SARS and the inability to allow what they allow in this case...not saying theyre perfect in anyway or that there arent flaws in the ACT

 

[Greg C]

Oh and I like the general idea of the question but I throw something back at you once again.

If they were not family and in some way connected persons would you believe that this transaction would take place the same way or do you think there would be a contract stipulating certain things relating to the lessor and lessee.If the answer is yes,your questions is in some form void,if No I ask you this.

When can I informally pay you money to have full usage of your place seeing as we are family? you know tax family after all

Note:No advantages should be given to family and connected persons as this is where all the dirty deals happen.

 

[Stefanmuller]

Oh and I like the general idea of the question but I throw something back at you once again.

If they were not family and in some way connected persons would you believe that this transaction would take place the same way or do you think there would be a contract stipulating certain things relating to the lessor and lessee.If the answer is yes,your questions is in some form void,if No I ask you this.

When can I informally pay you money to have full usage of your place seeing as we are family? you know tax family after all

Note:No advantages should be given to family and connected persons as this is where all the dirty deals happen.

We (I) are getting way too technical here, and the property is now in his name anyway. But it would have been an interesting situation if it kept going on. I find the situation interesting, and although I am not sure how SARS sees this, I am just trying to give my opinion of the scenario. If it was me, I would either:
1) Include the rent in my income, and deduct all the expenses including the bond interest
2) Include the rent and all the expenses in my parent's income, and then maybe just treat the net rent as a loan from/to them.
3) Treat the bond payment I pay as actual rent expense for the use of the business, and the rent I receive as subletting rental income. The parents then include the rent (bond amount) as rental income. Then decide which expense I want to claim on my side, and which should be claimed on my parents side. Generally the owner pays the maintenance and rates. In all cases a contract agreement would remove all doubt as to how to treat it.

The simplest and technically correct thing to do in this case would have been for the rental income from the third party to be included in the parent's income, as they own the house. The bond interest can then be deducted against that, and all the expenses paid by the son can then also be deducted as he effectively borrowed them the money to do it by paying it on their behalf. If all above gets included in the son's income and he treats the bond as a loan from the parents, effectively you will be getting at the same "net profit from rental". So he is not being put in a better position, and SARS is not losing out. But if you look at substance above form (Afr: wese bo vorm) then he is effectively using the property as if he owns it, so should be able to deduct expenses as if he owns it.

I can for instance borrow money from my dad's flexi bond to buy a bakkie for my business, and then pay him back at the same rate. I can then deduct the interest portion using a amortisation table. I am borrowing money from him that he borrowed from the bank and paying it back (which he pays to the bank). If the bond was zero when he took the advance for my bakkie, I might as well just service the bond directly. So the loan does not need to be from a bank or whatever or if it is it need not be in your name. As long as he also includes the interest I paid him in his taxable income, which will be partially exempt on his side. But yes, contracts or written agreements in the case of rent agreements and loan agreements are recommended - Celine would know what SARS require. This would obviously be the case if people are not connected in any way, for obvious reasons.

To include the rental income in his taxable income, and not the bond on the interest he is paying, seems to not be fair - as no-one else is claiming the interest already. And he is paying this bond in order to use the property and earn that rental income. If he is not allowed to claim the interest, then he also should not be allowed to deduct the other expenses because the expenses relate to a asset he does not own nor one he is paying rent on.

 

[marco]

Greg,
I have been trading on the JSE like in buying stocks and selling when appropriate and buying again. This is considered as Trading and not investing.
At no stage have I "Cashed in" or withdrawn into my bank account any money. I keep it all on the JSE's account.
The interest that I get on my cash I add to my Efilling work page.
Question now is, what happens to the the gains I made over the years and the dividends that I reinvested ?
Too many trades to remember and too many divs that I reinvested.

 

[marco]

Greg,
I have been trading on the JSE like in buying stocks and selling when appropriate and buying again. This is considered as Trading and not investing.
At no stage have I "Cashed in" or withdrawn into my bank account any money. I keep it all on the JSE's account.
The interest that I get on my cash I add to my Efilling work page.
Question now is, what happens to the the gains I made over the years and the dividends that I reinvested ?
Too many trades to remember and too many divs that I reinvested.

 

[ViperGTI]

Hi... by the way, thanks everyone for your input... Appreciated

 

[Greg C]

Greg,
I have been trading on the JSE like in buying stocks and selling when appropriate and buying again. This is considered as Trading and not investing.
At no stage have I "Cashed in" or withdrawn into my bank account any money. I keep it all on the JSE's account.
The interest that I get on my cash I add to my Efilling work page.
Question now is, what happens to the the gains I made over the years and the dividends that I reinvested ?
Too many trades to remember and too many divs that I reinvested.

Hello there,

She pointed out to me that as an investor one needs to remember the following:

Shares attract two kinds of returns, capital growth (appreciation) and dividends. Based on current South African tax laws, dividends are not taxed (tax-free) but capital growth is subject to tax.

SARS taxes you on your share gains in one of two ways. It may subject your gains to either capital gains tax (CGT) or income tax.

The one big thing to remember is that the rate of Income Tax is higher than Capital Gains Tax

In your case as you have no intention of keeping the shares,and sell them for a profit in the relative short term your gains will be taxed as income tax,this goes for the derivatives as well.

Hope this helped.

 

[Greg C]

Apologies for the she part,was an email I was corresponding with.Ignore the she first part the rest is all relevent for your case.

 

[Zane123]

would like to know .
When I started at my current company they gave me a travel allowance. They said I must use it to finance a vehicle.
They gave me a company fleet card for fuel and maintenance. The amount I use on there card is between R4000 to R14000 I travel for the company alot.
They add the amount to my payslip as a fringe benefit, is this correct??I don't claim anything back from the company

 

[Zane123]

Company petrol cards

Hi Greg C
would like to know .
When I started at my current company they gave me a travel allowance. They said I must use it to finance a vehicle.
They gave me a company fleet card for fuel and maintenance. The amount I use on there card is between R4000 to R14000 I travel for the company alot.
They add the above amount to my payslip as a fringe benefit, is this correct??I don't claim anything back from the company.

 

[Swa]

Hi Greg C
would like to know .
When I started at my current company they gave me a travel allowance. They said I must use it to finance a vehicle.
They gave me a company fleet card for fuel and maintenance. The amount I use on there card is between R4000 to R14000 I travel for the company alot.
They add the above amount to my payslip as a fringe benefit, is this correct??I don't claim anything back from the company.

You travel to conduct company business? No they should not. An allowance is something that benefits you. This is a company expense. Kindly inform them of this and that they should deduct it.

 

[Stefanmuller]

Hi Greg C
would like to know .
When I started at my current company they gave me a travel allowance. They said I must use it to finance a vehicle.
They gave me a company fleet card for fuel and maintenance. The amount I use on there card is between R4000 to R14000 I travel for the company alot.
They add the above amount to my payslip as a fringe benefit, is this correct??I don't claim anything back from the company.

What they are doing is correct. As it is your personal car and they pay for the fuel that you also use for personal travel, it is a fringe benefit that you get taxed on monthly. You have to keep a log book of all your business travels and submit with your tax return to claim back the part that was used for business, together with your travel allowance. Basically if you travelled 50/50 you will get half back (of the tax paid on it). The more business vs private the bigger the refund.

 

[Swa]

What they are doing is correct. As it is your personal car and they pay for the fuel that you also use for personal travel, it is a fringe benefit that you get taxed on monthly. You have to keep a log book of all your business travels and submit with your tax return to claim back the part that was used for business, together with your travel allowance. Basically if you travelled 50/50 you will get half back (of the tax paid on it). The more business vs private the bigger the refund.

R4000-R14000 sounds like it's for business and not personal no?

 

[Zane123]

Yes. I travel all around RSA ,always on standby also work after hours. Going to see a tax consultant tomorrow

 

[Stefanmuller]

R4000-R14000 sounds like it's for business and not personal no?

It might be but even then, the company has to include it on his payslip as a fringe benefit because it is his private can too. He can claim the business portion back on assessment using a logbook. If he can prove that he uses the car at least 80% for business he can have the travel allowance taxed at only 20%. Not sure if you can do that with the petrol allowance.

 

[Swa]

It might be but even then, the company has to include it on his payslip as a fringe benefit because it is his private can too. He can claim the business portion back on assessment using a logbook. If he can prove that he uses the car at least 80% for business he can have the travel allowance taxed at only 20%. Not sure if you can do that with the petrol allowance.

Since it's majority business should it then not be the other way i.e. they include only the portion he uses personally? This is why companies should have their own cars for business purposes as employees always get to be the ones shafted. Personally if it was my business I would just ignore it as it's paid and written off as a business expense anyway. That's what management does with their phones expenses anyway.

 

[Greg C]

What they are doing is correct. As it is your personal car and they pay for the fuel that you also use for personal travel, it is a fringe benefit that you get taxed on monthly. You have to keep a log book of all your business travels and submit with your tax return to claim back the part that was used for business, together with your travel allowance. Basically if you travelled 50/50 you will get half back (of the tax paid on it). The more business vs private the bigger the refund.

Spot on.

 

[Greg C]

Ok, I have questions, we have been arguing about this at work.

Is Lotto winnings taxable?

Also, how does fixed deposit tax work? Say I have a big amount (yeah, from the lotto) and want to live from it from month to month.

Just to confirm, I can give my parents a R100 000 a year without tax complications, but does this include both parents or can I give each one a R100 000?

Lotto winnings are already taxed. They will withhold the tax payable on the winnings and you thus then have a choice for the net of whether you would like it paid out, monthly annually or as a lump sum or a combination. Depending on size usually paid out monthly with a portion as a lump sum as not to overly abuse the available funds in the lotto system. Further to this funds that become taxable to normal everyday people for lotto winnings are generally those that are regular gamblers. This can be difficult to prove from a SARS perspective but in more than likely your bank statements are used to try and verify this.

But if you are like any normal non addicted and you go one every now and then to the casino win a couple grand pay out. Its not taxable.