How to Cut Tax on Your Rental Properties in SA
If you’re investing in residential rental property in South Africa, there’s a powerful tax incentive you might be overlooking: Section 13sex of the Income Tax Act.
Introduced in 2008 to boost the rental housing market, Section 13sex allows investors to claim a tax deduction of 5% of the building cost of qualifying new and unused residential units (or improvements). Over time, this adds up to a significant saving.
Who qualifies?
To benefit, the following conditions must be met:
• The unit must be new and unused.
• It must be located within South Africa.
• It must be used solely for residential letting.
• The investor must own at least five units in South Africa.
Additional perk for affordable housing
If the property qualifies as a low-cost unit, the deduction doubles to 10% per year, meaning you could write off the full cost in just 10 years instead of 20.
Key points to note
• The deduction applies for up to 20 years (5% × 20 = 100%) or 10 years for low-cost units.
• SARS caps the claimable cost at the lower of the actual or market-related value.
• For sectional title purchases, only 55% of the acquisition price qualifies as cost (30% for improvements).
• You cannot claim if the property has already been sold in a prior year or if another tax deduction was applied to the same cost.
Why it matters for investors
Used correctly, Section 13sex can:
• Improve after-tax returns.
• Support cash flow planning.
• Enhance the financial feasibility of larger developments.
• Provide a predictable, long-term tax benefit.
The catch? You need to structure deals properly from the start and stay compliant with all the requirements.
For property investors and developers, Section 13sex is a golden opportunity to reduce tax and maximise returns but it requires careful planning.
For expert guidance on structuring your property investments to make full use of this tax break, reach out to STBB Attorneys at info@stbb.co.za.
