If you own one or more investment properties that you let out to tenants, it is important to note that any rent you receive forms part of your income and must be declared to the SA Revenue Service (SARS) on your annual tax return.
Tax obligations and consequences
Deliberately not declaring your rental income is effectively tax evasion, which is a crime and could lead to you paying a hefty fine – or even going to jail for up to five years.
What is more, says Berry Everitt, CEO of the Chas Everitt International property group, as SARS continues to improve the efficiency of tax collection, it is increasingly unlikely that any such non-declaration and or under-declaration will remain undetected.
“However, it is not all doom and tax gloom for landlords because they are allowed to deduct all expenses related to the letting of the property from the gross rental received when calculating the taxable amount of income received from a rental property.”
Writing in the Property Signposts newsletter, he says these expenses typically include any interest paid on a bond, homeowners’ insurance premiums, the municipal rates paid for the year, any amounts paid to repair and maintain the property and any levies paid.
“In addition, if you are retired and not earning any other income, it is just possible that your rental income will fall below the tax threshold for your age group and that you will have no tax liability. But as a landlord, you will still need to submit a tax return or risk having to pay an administrative penalty.”
*According to SARS, the tax thresholds for the 2023/ 24 tax year are currently R95 750 for individuals under 65, R148 217 for people aged 65 to 75 and R165 689 a year for those over 75. Check tax rates here.
Everitt notes that South African tax law also empowers SARS to issue tax assessments based on estimates to people who regularly fail to submit returns – and to charge penalties and interest on unpaid taxes.
“So, if you have not previously declared your rental income, you should seek the help of an accountant or tax consultant to approach SARS and voluntarily rectify the situation as soon as possible.”
Writer: Meg Wilson