Ryan Dingley comments on the primary residence tax concession that is available to South Africans until the 31st December 2011.

Recent Tax Legislation allows homeowners who hold their property in the name of a company, close corporation or trust, to take the opportunity to transfer the property, free of any transfer duty, and capital gains tax (CGT) into their own name. This will allow for such persons to take advantage of the Primary Residence Allowance for CGT which is presently R1.5m.

(What must be borne in mind is that the normal conveyancing fees will however still be payable in respect of the transfer from the company, close corporation or trust.)

The Taxation Law Amendment Act commences on 1 January 2010 allowing a natural person 2 years to take the opportunity to transfer their residence with the advantage of no transfer duty. In order to take advantage of this opportunity the following conditions provide an indication as to whether you could stand to benefit from this amendment:

  • The property must have been owned by the company, close corporation or trust since 11 February 2009, and all of its shares or member’s interest must be directly held by the natural person or his/her spouse to the date on which the residence is transferred into the name of that natural person or his/her spouse;
  • Where the residence is owned by a trust, a natural person must have donated the property to the trust or provided funding for its acquisition, (and / or paid the bond installments);
  • The property that was owned by the company, close corporation or trust must have been used mainly for domestic purposes from 11 February 2009 to the date of transfer and it must be no more than 2 hectares in extent;

There are other areas that need to be taken into account when calculating the base cost for CGT purposes but in essence the overall effect of the Taxation Law Amendment Act will be that the natural person will be regarded as having acquired the residence at the same time and for the same amount as did the company, close corporation or trust.

Once the property has been transferred into the name of the natural person then the primary residence allowance in respect of CGT, which is currently R1.5m, will be applicable. There are, however, certain estate duty implications which may need to be taken into account before deciding to pursue this transfer and we advise that you take legal advice as to whether you qualify and as to whether it would be advantageous to do so.