Tips for renting out a flat

[Azbubu]

Question about tax income and expenses when using a management agent.

Rental income (what tenant pays) : R10000
Agent fees : R1000
Rates + Levies : R2000

Agent pays the expenses and deposits R7000 into your bank account.

Would your rental income on the tax form just be R7000 with R0 expenses?

Or should you rather include the R10000 and list the expenses?

Basically, is rental income on the tax form what the tenant is paying or what’s landing in your bank account or does it not matter since it works out the same at the end anyway.

What if you list the R7000 as your rental income and still list the R3000 as expenses?

 

[zerocool2009]

Question about tax income and expenses when using a management agent.

Rental income (what tenant pays) : R10000
Agent fees : R1000
Rates + Levies : R2000

Agent pays the expenses and deposits R7000 into your bank account.

Would your rental income on the tax form just be R7000 with R0 expenses?

Or should you rather include the R10000 and list the expenses?

Basically, is rental income on the tax form what the tenant is paying or what’s landing in your bank account or does it not matter since it works out the same at the end anyway.

What if you list the R7000 as your rental income and still list the R3000 as expenses?

I doubt the agent would pay your rates and levies for you for starters. But if they do, yes.

I would personally just do it myself (why pay R1k for an agent who calls you if a geyser bursts). That the worst that could happen.

You can list R10 000 income and R50 000 expenses (if you have proof of the income and expenses (then you are in the clear)

 

[Azbubu]

I doubt the agent would pay your rates and levies for you for starters. But if they do, yes.

I would personally just do it myself (why pay R1k for an agent who calls you if a geyser bursts). That the worst that could happen.

You can list R10 000 income and R50 000 expenses (if you have proof of the income and expenses (then you are in the clear)

A lot of them do pay rates and levies on your behalf.

 

[zerocool2009]

A lot of them do pay rates and levies on your behalf.

Ok, I never heard of that, as agencies only collect rental income, take 10%. But if you say so (all good).

Remember to register for provisional tax

 

[Sideshow Bob]

Question about tax income and expenses when using a management agent.

Rental income (what tenant pays) : R10000
Agent fees : R1000
Rates + Levies : R2000

Agent pays the expenses and deposits R7000 into your bank account.

Would your rental income on the tax form just be R7000 with R0 expenses?

Or should you rather include the R10000 and list the expenses?

Basically, is rental income on the tax form what the tenant is paying or what’s landing in your bank account or does it not matter since it works out the same at the end anyway.

What if you list the R7000 as your rental income and still list the R3000 as expenses?

In above scenario, without any doubt, 10K has to be declared as rental income. For expenses, there are other category fields like rates, admin, fees etc.

 

[Azbubu]

In above scenario, without any doubt, 10K has to be declared as rental income. For expenses, there are other category fields like rates, admin, fees etc.

Thanks. So rental income is basically what the tenant pays.

 

[zerocool2009]

In above scenario, without any doubt, 10K has to be declared as rental income. For expenses, there are other category fields like rates, admin, fees etc.

Not quite, SARS will ask for you then why did you receive R7000 and not R10 000 ?

You need to proof everything at the end of the day.

 

[Azbubu]

Not quite, SARS will ask for you then why did you receive R7000 and not R10 000 ?

You need to proof everything at the end of the day.

You received R7000 because of the expenses incurred?

We need @AchmatK in here.

 

[Sideshow Bob]

Not quite, SARS will ask for you then why did you receive R7000 and not R10 000 ?

You need to proof everything at the end of the day.

I disagree. There is legal agreement done between agent & landlord that explains the R7K. I rent via RM and they cut their fees and deposit the rest. I have to declare full rental income - there is no other honest way.

 

[zerocool2009]

Thanks. So rental income is basically what the tenant pays.

Lets say the tenant pays R10 000, expenses -> R2000 in total. The agent then invoice you accordingly and pay the money over (minus your expenses and their admin fee). Your only proof is the invoice that the agent send you. If you get audited, you need be specific in what was incoming into your bank account. Sars have access to that at the end of the day

 

[zerocool2009]

I disagree. There is legal agreement done between agent & landlord that explains the R7K. I rent via RM and they cut their fees and deposit the rest. I have to declare full rental income - there is no other honest way.

Correct, I do agree with the agreement. If the gent specifies R10 000 with expenses or R7000 with no expenses it all boils down to confirm it.

 

[Azbubu]

Correct, I do agree with the agreement. If the gent specifies R10 000 with expenses or R7000 with no expenses it all boils down to confirm it.

I think that’s what it comes down to.
Either R10000:R3000
Or R7000:R0

And it should work out the same at the end.

 

[zerocool2009]

I think that’s what it comes down to.
Either R10000:R3000
Or R7000:R0

And it should work out the same at the end.

It boils down to how much admin do you want to make for yourself and IF SARS audits you.

Tip 101 being a landord : Make sure your admin takes 5 min max a month (and keep the SARS man happy)

 

[AchmatK]

You received R7000 because of the expenses incurred?

We need @AchmatK in here.

The full rental income is declared and deductions recorded under expenses irrespective if the owner or agent is paying it. Its still coming from the rental income.

The agent will send an invoice listing their management fees and and other services that they paid for relating to the property. These can include rates, levies, repairs and maintenance.

The agent invoice will be detailed enough and accepted by sars when you submit your tax return.

 

[Azbubu]

The full rental income is declared and deductions recorded under expenses irrespective if the owner or agent is paying it. Its still coming from the rental income.

The agent will send an invoice listing their management fees and and other services that they paid for relating to the property. These can include rates, levies, repairs and maintenance.

The agent invoice will be detailed enough and accepted by sars when you submit your tax return.

Thanks!

Another thing, when renting a portion of your home, it states to divide it by the total area of the house (including garages and outbuilding). So it doesn’t include the total land area but just the house area? So a garden won’t be included? What about something like a car port? Only the area of things under a roof and with 4 walls?

Don’t worry, won’t ask for free tax advice anymore

 

[AchmatK]

Thanks!

Another thing, when renting a portion of your home, it states to divide it by the total area of the house (including garages and outbuilding). So it doesn’t include the total land area but just the house area? So a garden won’t be included? What about something like a car port? Only the area of things under a roof and with 4 walls?

Don’t worry, won’t ask for free tax advice anymore

I had someone renting out space on his property for cars only. He could accommodate 3 cars in his garden and they only rented that out.

It includes any area for the exclusive use of the tenant. I rent out an area of my erf for the exclusive use of my tenants. It's about 20% of the total land area and includes a garden cottage and garden area.

 

[Azbubu]

I had someone renting out space on his property for cars only. He could accommodate 3 cars in his garden and they only rented that out.

It includes any area for the exclusive use of the tenant. I rent out an area of my erf for the exclusive use of my tenants. It's about 20% of the total land area and includes a garden cottage and garden area.

Thanks.

So if you have a large plot 1000m2, with only a small house on it 180m2, and the flatlet you rent out is 30m2

It would be 30/1000 and not 30/180?

Permissible expenses must be apportioned where less than 100% of the property is rented out. The area which is let must be divided by the total area of the dwelling which includes garages and outbuildings. Permissible expenses must be apportioned where less than 100% of the property is rented out. The area which is let must be divided by the total area of the dwelling which includes garages and outbuildings.

 

[AchmatK]

Thanks.

So if you have a large plot 1000m2, with only a small house on it 180m2, and the flatlet you rent out is 30m2

It would be 30/1000 and not 30/180?

One thing to bear in mind is that the guidelines that sars post on their website is their interpretation of the legislation and they have been taken to court and lost many cases where they apply their interpretation incorrectly.

Their apportionment interpretation is very narrow and not always an accurate reflection.

Using the smaller size of only the dwellings however works out better than taking the whole erf size into account as the apportionment rate would be 16% vs 3%