As with any purchase, a portion of all registered property sales ends up in SARS’ coffers. Thus, the impact of additional costs, over and above the purchase price of a home, becomes so much more significant for, especially, first-time buyers.
When buying a property, the cost of the transfer duty or the VAT, whichever is applicable, is calculated on the purchase price and becomes due prior to the registration of a sale.
Transfer duty for existing property
The sale of an older or an existing property attracts transfer duty, so that the new ownership can be registered at the Deeds Office. Specific applications exist for private individuals, businesses, closed corporations and family trusts, or when a home-based business takes up more than 50% of the total land space of a property.
NOTE - Transfer duty values have changed as per the 2017 Budget. Please refer to this article for the latest Transfer Duty rates
First-time buyers benefit from purchasing homes priced below R750 000, which are exempt from transfer duty. When considering overall finance costs associated with buying a house, it is worth calculating possible savings through comparisons.
This 2015 Transfer Duty breakdown will help you compare.
From R 750 000.01 to R 1 250 000, Transfer Duty is calculated at 3% on the value above R 750 001 (So, you don't pay Transfer Duty on the first R 750 000.00.)
From R 1 250 001 to R 1 750 000, Transfer Duty is calculated at 6% on the value above R 1 250 000.00 PLUS a flat rate of R 15 000.00.
From R 1 750 001 to R 2 250 000 , Transfer Duty is calculated at 8% on the value above R 1 750 000, PLUS a flat rate of R 45 000.
From R 2 250 001 to R10 000 000, Transfer Duty is calculated at 11% of the value above R 2 250 000 PLUS R 85 000.
Change to Transfer Duty above R 10 000 000 - from 1 March 2016
From R 10 000 001 and above, Transfer Duty is calculated at 13% of the value exceeding R10 000 000 Plus R937 500.
No transfer duty is payable if the transaction is subject to VAT.
VAT on newly-built structures
Vendors’ Tax of 14% is included in the price of a property and applies to newly-built structures that are purchased directly from a developer, such as a sectional title unit in a complex or a house in a private estate.
Conveyance attorneys say the tax status of a seller determines whether transfer duty or VAT is payable by the purchaser. Different measures apply, depending on whether a seller or a purchaser, or both including that of auction sales, are registered as tax vendors.
Transfer costs or transfer duty
The breakdown of transfer costs relate to the cost of registration of a property, irrespective of the purchase being made through an agent or a developer or privately. Transfer duties and transfer costs are not one and the same thing, and transfer costs are often included in a developer’s costs.
Justine Joubert, partner at Rob McWilliams Attorneys says that transfer duty is payable to SARS upon transfer of the sale of a property, whereas transfer costs represent a conveyancing attorney’s fees for completing the transfer process on behalf of the seller and purchaser.
Other taxes not due at the time of transfer of a property, but which require provision in a personal income tax return for the applicable assessment period, include Capital Gains Tax.
Consulting a property expert can lead to considerable tax savings when buying your first and most affordable home.