Basically, if you own 5 residential units that are new (bought new as first owner or from developer or erected) and you use them all for trade (renting out), you can deduct 5% of the cost each year for single title and 2,75% (cost x 55% x 5%) on sectional title. This is on top of the normal rental profit/loss and normal deductions such as interest, maintenance etc.
For the scheme to work and get the most tax benefit, you need to be in the top tax bracket, and you will need to earn at least R70 000 per month (just in order to get the bond approvals). If you want to start off with one and acquire more as you become financially able to, as soon as you have 5 units you will qualify, and deductions will be allowed for the first time in the year you have five units (deduction allowed in full, not proportionally for part of a year).
For the first 5 years or so you will have a big tax loss that you will be able to set off against your other income. From a cash flow perspective, you will break even at around year four, and from there on in, you will be making significant money, increasing every year. We have many clients who already fall in the category of R70K plus a month, who then go and buy 5 units at once, because then you can immediately get the deduction immediately. You can then use the projection to calculate your taxable income from all sources taking the sec13sex into account, and ask for a tax directive from SARS. The result is instead of paying tax @ 40% on your salary, you can now ask to be taxed monthly at 20% or whatever may be the case.
I can send you cash flow and tax saving projections examples if you like.
