Quick question: Rental Income Tax

[spideroxy]

Hi guys

I am a total newbie to tax stuff. I hope you can help me. Just quick questions.

I bought a flat property on November 2017. Rent out R 8000 per month started on December 2017.
FYI, I have a job. I earn extra income as rental.

Rental Income: R 8000.00
Levy: (R 1644.90)
Rate: (R 1523.75)
Agent fee: (R 640.00)
Bond Interest: (R 3400.00)
-------------------------------
Taxable income: R 791.35
-------------------------------

Annual taxable income is R 9496.20. I see I fall under the R75k rental profit.

Kindly answer the following questions:

1) Shall I still pay tax even if my profit is under the R75k?
2) Shall I register as a provisional tax payer even if my profit is under the R75k?
3) What happens if the expenses exceed the rental income?

I have read Sars stuff. I dont understand it clearly. Simple English may be helpful.

Your clarification on these questions would be much appreciated.

Thank you
SpideRoxy

 

[Vrotappel]

SARS website

 

[rterblanche]

Rental income gets added to your salary normally. Don't know how it works if you don't have a salary.

 

[Ecco]

Hi guys

I am a total newbie to tax stuff. I hope you can help me. Just quick questions.

I bought a flat property on November 2017. Rent out R 8000 per month started on December 2017.
FYI, I have a job. I earn extra income as rental.

Rental Income: R 8000.00
Levy: (R 1644.90)
Rate: (R 1523.75)
Agent fee: (R 640.00)
Bond Interest: (R 3400.00)
-------------------------------
Taxable income: R 791.35
-------------------------------

Annual taxable income is R 9496.20. I see I fall under the R75k rental profit.

Kindly answer the following questions:

1) Shall I still pay tax even if my profit is under the R75k?
2) Shall I register as a provisional tax payer even if my profit is under the R75k?
3) What happens if the expenses exceed the rental income?

I have read Sars stuff. I dont understand it clearly. Simple English may be helpful.

Your clarification on these questions would be much appreciated.

Thank you
SpideRoxy

I was not aware there was a clause where people are exempt if you are under R75k profit. Are sure of this?

Regarding point 3, if you expenses exceed your rental income the loss can be offset against your other income and you could be due for a refund from SARS

 

[spideroxy]

Rental income gets added to your salary normally. Don't know how it works if you don't have a salary.

Ok. I would say:

Monthly salary: 37500
PAYE: (6 269.37)
Other Deductions: (7768.63)
---------------------------
23462
---------------------------

How to calculate extra income (rental income) with the salary to pay tax? But I already paid PAYE every month.

 

[Archer]

I was not aware there was a clause where people are exempt if you are under R75k profit. Are sure of this?

Regarding point 3, if you expenses exceed your rental income the loss can be offset against your other income and you could be due for a refund from SARS

Under R75k profit just means one does not have to be a provisional tax payer iirc

 

[Archer]

How to calculate extra income (rental income) with the salary to pay tax? But I already paid PAYE every month.

Just figure out your net income per annum (so salary + rental - rental expenses), throw it into a tax calculator and that will get you close enough (assuming you correctly account for RA and med aid if applicable)

 

[newby_investor]

It would probably be best to engage a personal tax accountant (PM me if you need a referral), such an individual could give you qualified advice.

But as far as I know:
- You don't need to register as a provisional taxpayer.
- You do need to keep detailed records of your income and expenses from the flat.
- When you do your annual return every July, you declare the extra income, SARS will probably ask for documentation, and they'll inform you that you have X extra tax to pay.

What I'd do, is stash your profits from your rental into a money-market account or unit trust, or into your bond. Then just take the tax out of there annually.

Edit: The same pretty much applies if you earn more than the exemption for interest (I think it's 23k per annum or so) or if you are invested in REITs, or if you work a side-job. You just declare the extra income, SARS tells you how much you owe them, and you pay them.

 

[Gaz{M}]

BTW I would fire the Agent, unless they are damn brilliant at their job. It's eating your profits.

I ended up calling the plumber and electrician myself even when I had an agent. They were just a worthless cost.

But you may be different.

 

[Barbarian Conan]

Get a tax consultant. Mine charges about R500 for the year, and you can deduct it as an expense.

 

[spideroxy]

Just figure out your net income per annum (so salary + rental - rental expenses), throw it into a tax calculator and that will get you close enough (assuming you correctly account for RA and med aid if applicable)

Thanks, Archer! Let me show you my calculation. Tell me if I am correct.

My annual net income after all deductions such as UIF, MEDS, PAYE, etc is now R 286 212.36
PAYE for the year: 6269.37 x 12 = 75232.44 (I paid tax from my salary)

Now I calculate to add rental income to the net income.

Annual Net income: 286212.36
Annual Rental income: 96000
Annual Rental Expenses: (92041.20)
--------------------------------------------
Taxable income: 290171.16

Now I get the Rates of Tax table

1. 290171.16 - 195850 = 94321.16
2. 94321.16 X 26% = 24523.50
3. 24523.50 + 35253 = 59776.50 (Tax on estimated taxable income)
4. Rebate: 14067
5. (59776.5016 - 14067) / 12 = 3809.12 - So I should pay tax, right? But my rental profit is too little. Why should I pay a big amount of tax? I am bit confused. Appreciate if you correct me.

Thank you for your time.

 

[bchip]

Your calc of Taxable income is not correct. You added Net Income, it has to be Gross Income.
You mentioned above its 37,500 per month...so thats 450,000 +96 -92

So its closer to the 100,263 in tax + (454 - 423)*36%
So roughly in total R112k. You've already paid 6k a month in PAYE

The total of R112k will also not be correct though, as we dont know your other circumstances.
Like you could have a travel allowance, Retirement Ann, Pension funds, or other subsidies from work.
You also need to factor in the rebates, etc.

This is why most people will hire somebody to do check this.

 

[cr@zydude]

Hi guys

I am a total newbie to tax stuff. I hope you can help me. Just quick questions.

I bought a flat property on November 2017. Rent out R 8000 per month started on December 2017.
FYI, I have a job. I earn extra income as rental.

Rental Income: R 8000.00
Levy: (R 1644.90)
Rate: (R 1523.75)
Agent fee: (R 640.00)
Bond Interest: (R 3400.00)
-------------------------------
Taxable income: R 791.35
-------------------------------

Annual taxable income is R 9496.20. I see I fall under the R75k rental profit.

Kindly answer the following questions:

1) Shall I still pay tax even if my profit is under the R75k?
2) Shall I register as a provisional tax payer even if my profit is under the R75k?
3) What happens if the expenses exceed the rental income?

I have read Sars stuff. I dont understand it clearly. Simple English may be helpful.

Your clarification on these questions would be much appreciated.

Thank you
SpideRoxy

Calculation looks right but remember that the interest amount will decline over time as you start paying off more capital and less interest.

If you are married in community of property, passive income like rent is split between spouses.