Renovations Bond

I.am.Sam said:
is the property transfer duty based on the selling price or the price valued by the city?
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Sellling Price.

As a general guide, total cost including lawyers fees is roughly 7-10% of the value of the transfer. So if it's R2m, then total costs shoud be around 150k. You can artificially reduce the purchase price in this case but then you will pay more Capital Gains Tax (CGT) in future. GIven that you not planning to sell, this isnt really an issue for you.
 
Jehosefat said:
Selling price. But if SARS catch you transferring it at way below market value they can slap you with donations tax.
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There's this too, but highly unlikely. Depends on the value of the transfer. If you selling a 1,5m house for 1m, should be fine. If you selling for 100k it will raise flags.

Is there an existing bond on the house?
Will you inherit the house in future?
Do you have siblings?
 
F1 Fan said:
There's this too, but highly unlikely. Depends on the value of the transfer. If you selling a 1,5m house for 1m, should be fine. If you selling for 100k it will raise flags.

Is there an existing bond on the house?
Will you inherit the house in future?
Do you have siblings?
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No existing bond
Yes I will inherit the house
1 sibling who I will have to pay out

And yeah in my case it will be "free" as i wont be paying them any money
 
F1 Fan said:
There's this too, but highly unlikely. Depends on the value of the transfer. If you selling a 1,5m house for 1m, should be fine. If you selling for 100k it will raise flags.

Is there an existing bond on the house?
Will you inherit the house in future?
Do you have siblings?
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If I understand correctly, if you buy a R1.5M house for R1M, you'd be liable for tax on capital gains of around R500k. I stand under correction though.
 
newby_investor said:
If I understand correctly, if you buy a R1.5M house for R1M, you'd be liable for tax on capital gains of around R500k. I stand under correction though.
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Capital Gains would only apply when you dispose of the asset. And is based on your buying price and selling price. It has nothing to do with the "value" of the property at any point in time.

If, on the other hand, you buy a R4m house for R1m then SARS might decide that the R3m discount that you got was a donation from the seller to you and then that R3m would be taxable as such.
 
Jehosefat said:
Capital Gains would only apply when you dispose of the asset. And is based on your buying price and selling price. It has nothing to do with the "value" of the property at any point in time.

If, on the other hand, you buy a R4m house for R1m then SARS might decide that the R3m discount that you got was a donation from the seller to you and then that R3m would be taxable as such.
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Yep correct
 
I.am.Sam said:
No existing bond
Yes I will inherit the house
1 sibling who I will have to pay out

And yeah in my case it will be "free" as i wont be paying them any money
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Cool, so your only actual costs will be bond and transfer costs. I would just have it transferred into your name and have it bonded. That way you can do renovations and pay out your sibling if you need to.

Is this your only property?
 
Jehosefat said:
Capital Gains would only apply when you dispose of the asset. And is based on your buying price and selling price. It has nothing to do with the "value" of the property at any point in time.

If, on the other hand, you buy a R4m house for R1m then SARS might decide that the R3m discount that you got was a donation from the seller to you and then that R3m would be taxable as such.
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A friend of a friend who recently bought a house below the value that CoCT had it at, said that SARS hit him for CGT with his most recent return. Maybe I misunderstood him, or maybe he was mistaken in what the tax was actually for.

City valued it at 1.8M, he bought for 1.5, IIRC. So it was on the R300k difference.
 
newby_investor said:
A friend of a friend who recently bought a house below the value that CoCT had it at, said that SARS hit him for CGT with his most recent return. Maybe I misunderstood him, or maybe he was mistaken in what the tax was actually for.

City valued it at 1.8M, he bought for 1.5, IIRC. So it was on the R300k difference.
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I'm not a tax expert but as far as I know, capital gains tax only applies on the disposal of the asset (or an event that counts as a disposal such as financial emigration). So I'm not sure what he was actually taxed for.
 
bchip said:
Be very careful with how much you use to renovate.
Most renovations dont return the value that people invest....ie people renovate for 500k and expect to sell the house for 500k more.
They add items like a braai area, garden feature or a pool and expect that it raises the house's value but it doesnt.

People compare square size, land erf, bedrooms and bathrooms. Thats it.
If your not changing any of these items its money that you probably wont recover for a long time.
Compare your current property to whats similar on those metrics in your area.

SA property is not in a sellers market where even items like expensive furbishing make a difference.
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Sometimes renovations aren't intended to increase the property value but to improve your very own living space.
 
Jehosefat said:
I'm not a tax expert but as far as I know, capital gains tax only applies on the disposal of the asset (or an event that counts as a disposal such as financial emigration). So I'm not sure what he was actually taxed for.
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I'll have to do some more digging.
 
F1 Fan said:
Cool, so your only actual costs will be bond and transfer costs. I would just have it transferred into your name and have it bonded. That way you can do renovations and pay out your sibling if you need to.

Is this your only property?
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So the reason I asked this question is if you have more than one property, you want to start thinking about a trust.
 
Jehosefat said:
Selling price. But if SARS catch you transferring it at way below market value they can slap you with donations tax.
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Someone told me the other day that you pay transfer duties on the municipal value of the property if the transfer is too low. So you can't just transfer a R 5 mil for R1.
 
Could the OP not cosign a new bond with this father?
 
F1 Fan said:
Cool, so your only actual costs will be bond and transfer costs. I would just have it transferred into your name and have it bonded. That way you can do renovations and pay out your sibling if you need to.

Is this your only property?
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i have a flat
wife has a flat

so the parents house cause im going to be inheriting it can i just pay the transfer fees ?
 
Honest opinion. Don't do any of what you're thinking

I've heard enough of these stories to know that they end up badly as soon as someone kicks the bucket
 
ShaunSA said:
Honest opinion. Don't do any of what you're thinking

I've heard enough of these stories to know that they end up badly as soon as someone kicks the bucket
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Not forgetting the family drama.

What my grandfather sold his house to my uncle is have clause in the contract which I guess like a lifetime lease for the granny flat which would prevented them from being kicked out on the street if things went sour and it eventually did with the daughter in-law.
 
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