1.Transfer duty loophole closing rapidly 2.Cape Property History 1950 - 1977



Transfer duty loophole closing rapidly "IN this world, nothing can be said to be certain, except death and taxes". Benjamin Franklin wrote those words in America 213 years ago, and they are still true today. Here in South Africa, the tax system has been substantially reshaped over the past few years, and further changes are on the way. Among the latest measures is one that will make a noticeable difference to the property market, especially to purchasers. Many people own, buy and sell their homes through companies, CCs or trusts because of the tax advantages that this holds. Because the company remains the registered owner, and therefore no change is made to the record in the Deeds Office, no transfer duty is payable. The public calls this a "tax loophole", but the SA Revenue Service calls it an "abuse". This loophole is closing rapidly. Parliament has approved a tax amendment law which intends • to create the legal concept of a "residential property company", defined as a company or a CC which owns residential property making up 50% or more of its assets; • to define the shares (or member's interest) in such a company as being "property" for the purposes of transfer duty; and • to make a change of ownership of such shares (or member's interest) the same as a change of ownership of the residential property itself, and therefore subject to transfer duty. Similar provisions would apply to trusts which own residential properties. Once these proposals become law, we can expect that purchasers of company-owned properties may no longer necessarily be keen to buy the companies in order to acquire the properties. If they have to pay transfer duty either way, it may be to their advantage to buy only the properties and leave the sellers with the companies. That way, they will avoid taking over any debts or judgments or pending legal actions with the companies. They will also avoid having to pay CGT when they sell their homes in the future. What is the current status of this legislation? As at the time of going to press, the only confirmed information we had (through phone calls to Parliament and the Presidency) was that Parliament had approved the legislation on 14 November and expected to send it to the President for signature by 29 November. It is up to the President to decide when to sign it, and after he has signed it it must be gazetted in order to become an enforceable law. As ever, we will monitor events, and keep our members and readers posted. UPDATE – the new law came into operation on Friday 13 December 2002. Transfer duty is therefore payable on the purchase of shares in "residential property companies" if the seller accepted the offer to purchase on or after that date. More highlights in the development of our industry and the environment in which it operates. 1950-1977 1950-51 • The Institute of Estate Agents and Auctioneers tries yet again to have a regulating authority set up for the industry, and is again defeated. 1952 • A building boom begins following the lifting of wartime restrictions. Large blocks of flats are built in Cape Town suburbs. 1958 • The IEA tries again, without success, to have a regulating authority set up. 1961 • The Group Areas Act is implemented in Cape Town. 1966 • The IEA establishes a voluntary fidelity fund for its members. 1967 • The IEA shortens its name to "Institute of Estate Agents of SA". 1968 • The SA Property Owners' Association is founded. 1970 • The Alienation of Land Act requires property sales contracts to be in writing. 1976 • In the absence of official industry qualifications, the IEA introduces the voluntary Certificate of the IEA (CIEA) examination. 1977 • At long last, the government establishes an Estate Agents Board as a regulating authority. It takes over the Fidelity Fund. Registration becomes compulsory for all agents and brokers.