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The taxman is coming for your rent

Sars commissioner says many taxpayers fail to declare rental income.

Tax dodgers beware. The taxman is coming for you.

The 2019 tax filing season kicked off on Monday and South African Revenue Service (Sars) commissioner Edward Kieswetter made it clear that it is time for taxpayers to render unto Caesar what is due to Caesar. 

Kieswetter says Sars noticed some disturbing trends among taxpayers who try to manipulate the system, including not fully disclosing the taxable income they receive such as rental money.

Read: Tax season opens with strong warnings against non-compliance

The commissioner told Moneyweb that Sars is expanding its data set so that it is able to correlate the information it has on its system with what it is receiving from taxpayers. 

One way this will be done is by matching the information that Sars has on a taxpayer with information held by the deeds office. This will also allow the revenue service to catch noncompliance among people who do not declare capital gains tax.

Read: Sars showing its teeth

Sars has a sophisticated case selection methodology that takes the information supplied by taxpayers and verifies it through the Sars risk profiling system, which highlights whether there is enough evidence to submit a taxpayer for an audit.

“This is the bulwark that we use to try and detect incorrect or fraudulent declarations,” says Kieswetter.

Old and new issues on rental income tax

FNB property economist Siphamandla Mkhwanazi says the practice of not disclosing rental income is not new, particularly in rural and township areas where it is not viewed as a form of income.

“One of the biggest forms of business in townships is backroom rentals, and that income generally does not get declared.”

Mkhwanazi says this matter will only be exacerbated now with household incomes under a lot of pressure.

He points out that many of the structures that are rented out are informal and won’t be easy for tax officials to trace, but acknowledges Sars’s efforts in collaborating with the deeds office, saying this signals a start, especially for the formal sector. 

Mkhwanazi notes that the global rental market has become complex with the emergence of electronic rental platforms such as Airbnb which has seen people convert their homes into rental stock. 

“It’s something that won’t be easy to track and you will find [it] in affluent markets such as your coastal areas.”

Sluggish rentals equal sluggish returns 

Data from rental payment platform PayProp shows that property prices are increasing at a slower rate than the sector has been accustomed to. The last quarter of 2018 saw the first uptick in the national rental growth rate after a downward trend that lasted two years.

At the same time, a report by property consultants Rode & Associates found a trend of landlords or managers accepting lower rental increases to retain tenants and keep vacancy rates from rising. Desperate efforts to draw tenants have seen some landlords providing costly incentives, such as a month of free rent.

In order to estimate the amount of rental income Sars expects to get it needs to consider various variables such as the number of rental properties it receives tax on, the tax rate, and the level of rent.

If Sars uses historic growth rates to estimate the level of rent, it might be in for a bit of a surprise because the growth rate has been declining,” says PayProp data and analytics head Johette Smuts, adding that this holds true for any other variable affected by the economy.

“The extent of the surprise will depend on how far reality is from their assumptions on a variety of parameters,” she adds.

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So, the months my property is empty with no tenants, I can ask SARS to compensate me? Looks like you want to drive a socialist ideology. Still, just 5 million taxpayers supporting 16 million social grants. #TaxRevolt

The true purpose of the new dawn has always been to steal more efficiently and honourably.

It might also not be as lucrative as our dear Mr. Kieswetter might be thinking. Most people have bonds and once that and maintenance has been deducted there is not much left to tax in the current market.

Cadre Kieswetters government has already ensured that the property sector is destroyed through EWC, low growth etc. and this will just add to the problem.

The war cry is kill the goose.

Sell your property and move the money offshore ASAP. This lot wants to see you butt naked in the street.

“Killing the goose that lays the golden eggs” has long been used as an analogy for ANC economic policy. But we’re past that.

By the end of the World War II battle of Stalingrad, gangrenous German wounded were laid out next to each other in the ruins of bombed out buildings.

It was easy to know when a patient has dead, as a blanket of grey lice would suddenly scurry over to the adjacent victim.

The true purpose of the new dawn has always been to steal more efficiently – that’s all. this new R500k threshold is great, if you trust SARS to get it right – but we all know how often the ANC gets it right. The ANC and this so called new dawn, is made up of folks that will happily return things to when Zuma was in charge as they want their share of the LOOOOOOOOT. The ANC has so MANY TAXES I’m surprised we aren’t charged for breathing..

@Pen_Dragon that’s planned for carbon tax version 5, its coming, we still just getting it going, then the inevitable scope creep will set in…

I’d hope the goal is to increase the 5 million taxpayers to, say, 10 or 20 million, by finding the non-payers. Then I’m all behind Kieswetter. The next goal should be to draw tax from the traditional farmers and informal roadside vendors. Any business activities based on owning any form of capital should fall outside of the personal income tax thresholds and be subject to company tax rates.

Best way to widen the tax base is to increase VAT. Certainly some will still evade but every legal transaction will contribute.
Increase VAT to 25% and reduce personal tax for individuals.
That way anybody who buys stuff pays tax, not only the SARS captives.

Yes, SARS does “compensate” you in that you’re still able to claim the various deductions (interest, maintenance, certain wear and tear allowances etc) which (if the property is held in your personal capacity) reduce your tax liability. Of course ring-fencing of these losses comes into play in certain circumstances.

Has SARS heard about the 20/80 rule? 20% effort and 80% gain?
Go for the previous Government administration, that is where you must look.

How did some people get 16 bedroom mansions in Dubai?
What else did they take to Dubai?
Did they declare it?

2019 Tax season is going to be a major shock/reality check.

Don not stress Mr. Taxman.

I sold my rental property for after seeing how the ex-president Zuma spent my tax money, I was audited every year because I declared every cent of my rental income, I was audited every year for being an honest tax payer.

Now I have simplified my tax returns, less tax admin, live more, spend my money before you do, the politicians can go and work for their money like the rest of the citizens do every day.

Exactly.

FIRST:

1) Sort out the wasteful use of tax – billions lost to corruption and incompetence.

2) Grow the tax base.

Then come after the goose laying golden eggs for the last 25 years.

That’s not how it works. if you receive income, you can offset your costs on your income tax return.

A while back I think it was the economist that described South Africa as an ineptocracy…

Ineptocracy (in-ep-toc’-ra-cy)
– a system of government where the least capable to lead are elected by the least capable of producing, and where the members of society least likely to sustain themselves or succeed, are rewarded with goods and services paid for by the confiscated wealth of a diminishing number of producers.

The biggest threat to the standard of living in South Africa is the collapse of Municipalities.
All senior staff at these Municipalities need to be brought into SARS fold . Ie Audited in the traditional sense as
well as life style audits . Collections of arrear rates should also be transferred to a taxpayers profile for collection .
Go after the stuff that really matters like taxing all bribes paid to Government officials over the last ten years .
The public has lost faith in the integrity of SARS because so many in Government seem to get away and I’m sure
do get away with huge non compliance . By the way has Jacob paid his donation tax due on his compound in Zululand………I’m sure not !

Jacob should be paying fringe benefits tax on his compound in Zululand, not donations tax. Donations tax = 20% whereas fringe benefits tax = 45% for Jacob. But I would be surprised if SARS did that – too compromised?

Jacob doesn’t even submit a tax return let alone pay tax.

The whole tax payment system for individuals have been skewed towards salary earners and this is UNFAIR. This is great news. Thousands of South Africans make a living off rental income alone. It is unfair that salary earners alone carry the tax burden (and the argument about informal back room rental doesn’t justify non-compliance),

Given that the non-payment rate for electricity and municipal rates in many areas dominated by ANC voters is 90% (and even 98% in some Free State towns), do you seriously think there will be any consequences for ANC vottahs who don’t pay their taxes?

Thousands? What is your source. You can share that with SARS as they are indeed trying to find these people (from the article)

@JuanCPT ….your logic DOES not make sense at all !

Your analogy is akin to saying to a serial killer ‘ Hey, dont just kill me, what about my neighbour ?’

Firstly, the reality is most property owners are just about keeping afloat, what with rising costs/maintenance/lawless municipalities suddenly billing you tens of thousands for fictitious consumption/new taxes introduced all the time/defaulting tenants/stifling red tape and impossible loan requirements etc etc

In fact, I would go so far as to say that the whole property sector is heading for implosion at this rate

The reality is, regardless of who SARS comes for, I keep stating that it DOESNT matter !!!!….:

They could 100% tax every single person, and there would STILL not be enough, as the looting will just exponentially increase in tandem

Is this sinking in yet ??????

Aahh, SARS – the terrifying enforcement arm of the brutal oligarchy. A real protection racket – except – with legislation and jail sentences to back it.
You work your @rse off your whole life. You pay income tax, VAT, fuel levies, municipal rates & taxes, excise on each dop you drink and each cig you smoke, tolls on roads that were built with your tax money, CGT on each bit of property that you manage to scrape together over the decades, gift tax on anything you give away, government fees on everything from each passport or driver’s licence you renew to every permit issued for things that every man should be freely entitled to. It just never stops.

Oh, and you get minimal if any services in return for all of the above. At most, an indolent official or law enforcer may actually listen to your problem, before failing to do anything whatsoever to actually address it.

Then, when you finally die, your children do not inherit what little you managed to build – SARS stands first in line with grubby paws and drooling grin, to grab 20% of your assets – on which you were already taxed three times over.
We need to renegotiate the “social contract”. With urgency and prejudice.

Both parties to any contract give something and get something. Since I am expected to pay for freebies for millions (e.g. social and child grants) on my hard-earned money, it is reasonable for me to expect my counterparts to give something in return.

They should therefore stop breeding like flies and creating ever more unwanted babies I have to support.

I second that!

As you describe it. And being one of the reasons why the wealthy emigrate.

@Darwin…Brilliant !!!

You have summed it….and your intent is being shared with the great majority of taxpayers now

What really surprises me is that a fully fledged tax revolt has not materialized yet

Wonder just what the breaking point will be ?

When you have a government that is BROKE, they will HAVE TO BLEED the working people to the breaking point! These on the job trainees called government are clueless and the position S.A. is in PROVES IT!!!!!

“One of the biggest forms of business in townships is backroom rentals, and that income generally does not get declared.”

I would love to see SARS go into a township to get that money!

Bobsmth : That income even if declared has a 99% Chance of being Tax free as the limit for Starting to pay tax is way above what Rental will be collected in a Township. The Owners I can guarantee are not registered for tax and never will be !!!!!
Dream on SARS —you will never collect here .

What a joke. You’ll not be able to trace or track these ‘landlords’ via the records of the deeds office. It’s a well-known fact that these rentals are paid in cash to prevent SARS from tracking this ‘income’.

They will nail all the AirBnb’s easily enough….the government has already got agreements in place with Airbnb with mechanisms for each property to be registered.

All owners will be traceable. SARS will just have to press a button and all rentals accrued by these Airbnb hosts will be exposed to SARS….big trouble coming for them if they haven’t been declaring this income.

Air BnB should be loss making if you doing your taxes right… Now you get to claim back all the expense’s incurred in seeking the income… did utilities just become a tax deduction? yes sir…

From this can we assume that the EFF/Zuma faction will be resisted when they espouse that government owns all land? In general you cannot collect rent and pay taxes if you do not own the property.

You are missing the point Christina: The deeds office recrds would help where Sales are made and transfer Takes Place : In that case Capital Gains Tax is a posiibility : Thats where this may Help , but again unlikely that Township properties arre even Registered /Have Title Deeds .

You are indeed missing the point, Christina. Apart from what edalsg says, SARS can see how many properties you own. If, for example, you own four properties but don’t declare any rental income, SARS will rightfully ask questions.

SARS will go after the PAYE taxpayer and squeeze the latter for the last cent. Easy pickings. Meanwhile, the politicos, the gangsters, the taxi drivers, the construction mafia, the drug dealers, the truck heist experts, etc., carry on acquiring millions outside the tax net and SARS, like the government, being afraid (think violence) of these “enterprises”, will ignore them.

“Sars has a sophisticated case selection methodology that takes the information supplied by taxpayers and verifies it through the Sars risk profiling system, which highlights whether there is enough evidence to submit a taxpayer for an audit.”

Yeah right. Claim legitimate expenses and they will single you out every year for audit. On top of that they will add income that you did not receive. The objection process does not work, still waiting for response. They do manage to send SMS threatening legal action though.

Sounds like SARS – waiting for about 4 years for a response from them on an ADR meeting where they are required to respond within 90 working days.

Sounds familiar, added R100000 to my wife’s income 5 years ago,never responded to queries and still awaiting a response to an appeal that
was lodged 4 or 5 years ago.

So they gonna squeeze those who are paying tax to make up for the failing system. Why don’t start collecting unpaid electricity bills from the municipalities and billions that Soweto residents owe

How will SARS ever get tax out of people renting back rooms in townships?
=>As impossible as trying to collect tax from Taxi drivers.

SARS seems to be very selective who they pick a fight with.

When will SARS take on the previous government administration that plundered the country out of many Billions (ZAR) tax money?

Are the assets in Dubai not illegal? and also contravening the country’s foreign exchange laws?

“How will SARS ever get tax out of people renting back rooms in townships?”

If you’re renting out a back room in a township, your overall income is probably too small to pay any tax anyway- the first R500 000 is tax exempt.

First R500 000.00 is not tax exempt, you do not have to file a return if you earn R500k or below per annum. There are however ‘terms & conditions’ that apply.

The tax return exemption is only for employees working for one employer. Even if you earn only R30 000 from rent, you are technically obliged to submit a return.

Squeeze the tax base until it’s gone, leave the informal sector alone, mismanage/steal the revenue received…rinse repeat.

SARS would do far better and far quicker by going after the ANC MP’s, Provincial Premiers and Municipal deployees and their families and any person connected to them (as defined in the Income Tax Act) and doing lifestyle audits on them. They can follow up on all the companies involved in state capture to disallow all amounts paid as bribes and ensuring that the bribes paid in the form of “consulting fees” or other expenditure is disallowed. Considering the billions alleged to have been stolen there must be a lot of money to be taxed and on which penalties and interest can be levied.

Does the taxi lot pay any tax on income ? Can someone with info on that sector comment please. I want to see the petrol price increase by R5 a liter. That is the only way the non tax payers will pay.

@Staalpen ….you answered your own question

Why do you think our fuel is so high !? [ plse dont say oil/$ conversion – it only highlights ignorance on the subject ]

Check the largest component in the price – FUEL LEVY

That is exactly how govt is extorting from the taxi industry – fuel being their biggest consumption these days [ how ironic – one gangster ripping off another he he ]:

And govt just keeps increasing fuel levy….check fuel price next year if you still dont believe

That way it also extorts from all motorists as a means to try recoup on that thuggish attempt known as E-tolls

That and VAT are the EASIEST form of revenue extortion [ oops,’collection ]

I would like to congratulate all the comment submitters to this article. You have successfully raised all the legitimate questions to SARS , which unfortunately will never be discussed or answered in open debate.

Rather misleading title. Anyone renting out property is “carrying on a trade” and hence liable to be taxed on it.

What Kieswetter appears to be saying is that SARS is trying to improve the efficiency of SARS at countering evasion in this regard.

Whether landlords should be receiving allowances for, say, “social housing” or building (or converting) _more_ residential accommodation in order to reduce the housing backlog is a political question for the voters to answer. (SARS is obliged to act within the legislative framework). With the majority voting ANC or EFF, it seems that the voters reject this in favour of expropriating the limited amount of what is available.

Kieswetter is not endearing himself to tax payers in the way he bullies the middle class and going after low-hanging fruit. Since he took office what has he done about high-flying, corrupt, politicians’ tax dodging? For instance, has he audited Zuma’s taxes, because of late SARS spends most of its time AUDITING tax returns?
The days of SARS telling the public “sorry, can’t comment because tax payers’ affairs are confidential” are OVER; SARS needs to be seen treating everyone as equals before the law. It needs to show clearly that, unlike the Tom Moyane days, it has stopped favouring connected individuals and companies.
Is SARS, for instance, also doing an audit on the business in the following link, and similar businesses and individuals? https://www.moneyweb.co.za/news-fast-news/glencore-to-cut-down-on-tax-haven-subsidiaries-as-scrutiny-grows/

Tell me Mr Kieswetter, just how much tax do you collect from the multi billion Rand taxi industry and how do you police this cash business and root out the obvious tax evasion opportunities available to this mob?

Maybe your anc masters see this as another “public service” that should be funded by the lawful tax paying minority in this sociast gimme club “dream” of yours?

Sars has a sophisticated case selection methodology…with people in almost every Municipality,SOE and many SA Companies having stolen billions of Rands, SARS can only be taking seriously when we see these thieves locked up and made to pay up.Why hunt the small fry while these known thugs carry on. Lets wait and see if the TAXMAN can be taken seriously.

Govt also needs to realise when it comes to tax collections targets, as a result of their own socialist policies / stance against business, the country’s economy is now a shadow of it’s former self.

Have they adjusted their tax collection targets down in line with this tiny “new dawn” economy we have now?? (accept it or not, it’s a different country economically)

WT….. how the narrative has changed. I thought that these guys would have taken some PR advice (maybe Bell Pottinger, ha ha..) and been a bit sensitive to threatening the paying taxpayers (the people that are not declaring Rental Income will not be concerned about these comments, so it is merely a show of force to the compliant) so quickly especially since we have been hearing and are still hearing of the recent capture of SARS (fraudulent VAT refunds etc..) and of ridiculous weddings in the Himalaya’s paid for by these same paying Taxpayers

Also I think this is merely a way of threatening the compliant in that I doubt that they will get a substantial extra gain from this, however by doing this they will probably damage tax compliance further.

Maybe getting a little extra from a “lot” of Taxpayers will be more and easier than going after the above mentioned few.

They would have done better by announcing current actions in prosecuting one or two high profile cases, but this I know like many other MW readers that this will never happen.

If these comments are a good representation then it’s clear there are a lot tax evaders out there.

Think_B4U_Reply……ha !…its only the beninnging [ sorry, I couldn’t resist ]

In fact, the Laffer Curve [ ok, lets just call it the ‘Fok off Point’ ]long ago crossed the thresh hold [ around the time CGT was introduced…and that was actually a long time ago ]

And you know what – its fully understandable

In effect, by paying tax one could be guilty of compliance to fraud [ as by paying taxes one is complicit to corruption and theft by implicitly handing over funds to looting powers – whether its law or not…….especially as originally,tax on a sovereign individual is not actually legal or law – only corporations could be held liable for tax ]

But we adopted our illegal tax structure from the colonial empire

Go research this and be prepared to be unpleasantly surprised

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