Real Estate Investor Magazine South Africa April 2015 | Page 10

PROPERTY ALERTS

The
Bad

The
Good

They
Ugl

Transfer Duty
Threshold Raised

Further hikes in
electricity costs

Tax Freedom Day:
Later Than Ever

he adjustment in transfer
duty on property, which came
into effect on March 1, will
assist first-time homebuyers and
buyers in the affordable property
market, although top-end buyers will
have to dig deeper to afford this tax.
The adjustments included raising
the threshold for properties exempt
from transfer duty from R600, 000
to R750, 000. Previously, buyers
of a property valued at R750, 000
paid R4, 500 in transfer duty, but
are now exempt. Properties valued
at R750, 000 comprise an estimated
50% of the market, according to Pam
Golding Properties, and around 87%
of buy-to-let properties in South
Africa, according to TPN.
The amendment also decreases the
transfer duty payable for properties
valued up to R2, 3 million. For
example, for a property valued at R1
million, the transfer duty is reduced
from R12, 000 to R7, 500, and for
a property valued at R2 million, the
transfer duty is reduced from R77,
000 to R65, 000.
Unfortunately, buyers of high
value properties will now incur
higher transfer duties. For example,
for a property valued at R3.5 million,
the transfer duty is raised from R227,
500 to R237, 000, and for a property
valued at R5 million, the transfer
duty is raised from R317, 000 to a
whopping R387, 500.

he 2015 Budget announced
an increase in the electricity
levy and indicated Eskom
will apply to the National Energy
Regulator (NERSA) for adjustments
towards cost-reflective tariffs to
stabilise its financial position.
“Eskom’s cost of generation has
skyrocketed. The Budget provided
a clear sign that we will shortly see
a significant increase in the cost
of electricity. This is bad news for
both business and ordinary South
Africans,” says Brian Wilkinson,
Chief Executive of the Green
Building Council of South Africa
(GBCSA). “There has never been a
better time for property owners, and
tenants, to seriously evaluate how
energy efficient their properties are.”
The average green office building
saves 34% in electricity consumption
compared to a standard building. In
buildings that have not yet invested
in going green, tenants in these
buildings can be paying 34% more
for their electricity.
Investment in off-grid or cogeneration is taking hold as such
projects increase their commercial
value during the electricity crisis.
The proposal to more than double
the current energy efficiency savings
incentive, from 45c/kWh to 95c/
kWh will spur both industry and
other sectors to embrace more energy
saving innovations.

hile taxes are collected
over the year, Tax Freedom Day illustrates how
many days of work per year it takes
average South Africans to earn the
amount of money they need to pay
their taxes. Says statistician Garth
Zietsman: “Given the estimated
Central Government Revenues for
2015 as a percentage of Growth Domestic Product (GDP), Tax Freedom
Day for 2015 is estimated to occur on
May 20 – one day later than 2014.
There has been a trend toward taking more of the GDP in taxes every
year. The government seems to be
taking more than an extra 1.7 days
of national production every year, or
almost 1/5th more since 2002.”
According to the Free Market
Foundation, governments encroaching on people’s incomes and their
freedoms is a worldwide phenomenon. To resist government encroachment, South Africans need
to be more proactive, for example,
by stipulating a maximum percentage of GDP that government can
take. If this figure is set at 20% per
annum, government could take only
73 days of national income every
year, setting Tax Freedom Day back
to 15 April, putting more money in
people’s pockets, making government
less intrusive, and increasing savings
and capital formation, which will increase economic growth and reduce
unemployment.

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March 2015 SA Real Estate Investor

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