The PROS and CONS of transferring Property from a Trust to your Personal Name

A significant new tax break which was granted by the South African Revenue Services on October 31 this year allows those whose residential properties are 'held' in companies, close corporations or trusts to transfer them, free of income or capital gains tax or transfer duty, into their own names or those of their beneficiaries.

The new law allows greater flexibility about the choice of the beneficiary - and it can be made use of until January 1 2013.

This new ruling should be made use of by as many people as possible because there is no logic in sticking to the old holding entities.

To hold a property in a trust, a close corporation or a company will automatically result in its eventually being taxed higher on capital gains when sold than if it were in the individual's name.

Furthermore, no concessions will be made for it possibly being the owner's primary residence. If the property is the owner's primary residence and is registered in his name, the first R1.5m will be exempt from tax.

The advantages of accepting individual ownership have been reinforced from the start of this year by the government's instituting an annual levy for the continued establishment of corporate entities. This could add significantly to the annual holding costs of such entities.

Under the amended law the person taking ownership of the property from a company must have lived in and used it primarily for domestic purposes from or before 11th February 2009. Furthermore, he must still be living there.

The beneficiary must also be a 'connected' person in terms of the Income Tax Act. This means that the owner himself and a relative must together have at least 20% of the holding company's shares.

If the property is being taken over from a close corporation, the other owner/partner can be another member of the close corporation or a relative of such a member - but in all cases the transfer will become invalid if steps are not taken to wind up, liquidate or de-register the company or close corporation within six months of the transfer of the property.

Similar rules apply to property transferred from trusts, but there the 'connected persons' concept has been extended to apply to any beneficiary of the trust or a relative of that person.

Where the original holding vessel has a more complicated structure, provision is made for unbundling this.

For example where a property is owned by a company, a close corporation or a trust, which is in turn owned by another corporate identity, or where the shares in the company are owned by a trust the beneficiaries of which live in the home, the new law again allows for the free transfer of the property from the company to the trust and then from the trust to one or more beneficiaries.

Again, the person to whom the property is transferred must have been using it as his primary residence for the stipulated period to qualify for the capital gains tax exemption.

Although the tax savings of a transfer to individual ownership are significant, the conveyancing fees will still be payable, as on any normal residential property transaction.

Furthermore, if a property is bonded,, the costs of cancelling the bond and registering a new one will have to be allowed for. It is possible that the new owner under today's stringent National Credit Act restrictions might find himself unable to raise a bond of the same size as the original - he might even be refused any bond.

This matter should be looked into before the transfer is affected.

*Lanice Steward is MD of the Cape Peninsula estate agency Anne Porter Knight Frank

How to survive the Credit Crunch??

If I had £1 for every time I either heard the words ‘Credit Crunch’, then this so-called recession would be the furthest thing from my mind (cos I’ll be sipping pinas coladas on my yacht somewhere in the Caribbean :)

On average, economic recessions occur once every 7-10 years. And yet, with this ability to predict when the brown stuff will hit the fan, shouldn’t we be less surprised when we find the world in economic turmoil?

Wasn’t the last time bad enough? Or do you simply choose not to remember the last time?

So without pointing fingers at Economists (What do they know?), Bankers (greedy bunch!), Presidents (yes, Dubya !), Prime Ministers (yes, Mr Brown !) or your cat (no kicking please !), let’s look at some tips on how we can lessen the burden of this recession, so that when the next one comes along, we are ready for it !!

(Or, I can just copy and paste this article 7-10 years from now :)  

United Kingdom

Do you like free cash?

The Problem:

Almost 35% of all UK employees are eligible for a tax refund (no jokes!!) & every one of these employees can claim their tax for the last five years (even Saffers who have left the UK!!)

So why doesn’t everyone claim this moola when they leave? Cos, they’re either don’t know about it or they’re just too damn lazy !! And what would this refund cost me? A massive………£0 :)

The Solution:

There are 3 ways in which you qualify for a tax refund:

1) Earnings – Where your annual earnings were less than the personal tax free allowance.

2) Employment - You haven’t been employed for the full tax year.

3) Tax Code - You’ve been taxed under the wrong tax code (Duh!!).

You can always apply for a free assessment……….What have you got to lose?

Notable link:

http://www.horizon-consultancy.com/claimyourukrefund.html

International

Sending money to Mama?

The Problem:

Every single day, millions of people send money overseas. Once they’ve decided on a vendor they rarely change even if the rate / speed / security of the transaction is not the best possible.

But how does a better exchange rate help me when I’m only sending £100 at a time? You might only save £1 on every £100 per transaction, but multiply this £1 with every transaction you’ve ever done…………..I think you get my point :)

The Solution:

Currency Traders are trade worldwide currencies on a daily basis. Where commercial banks might give you a weekly average exchange rate, currency traders give you the exchange rate on that particular day of trading. Their fees are also a LOT lower than banks !!

So, the question remains, When will you see the light and make the change?

Notable link: 

http://www.horizon-consultancy.com/sendyourforex.html

And a few more tips on how to save:

- Work out a proper budget (not on the back of a cigarette packet !!) as you need to look at everything you spend to get a true picture.

- Take a packed lunch to work, skip the Pret sandwiches & save about a fiver a day (If you also skip the daily Latte you’ll save £10 a week !!)

- Change credit cards, switch them to a ''balance transfer offer" that stays at a low interest rate until the debt is repaid.

- Ditch the rugby / football / cricket season ticket (I know this one will be the toughest!!) or at least split the cost with friends. After all, how many of those midweek fixtures will you actually attend?

- Cancel the Gym membership, as many leisure centres offer membership schemes, have personal training & are kitted out with the full range of equipment. (Or you can go for a run which will save you £50 per month)

- Invest in energy-efficient light bulbs as they last about 10 times longer than ordinary ones (not because they’re made by Duracell batteries), and cost about £3. (You’ll save about £7 on your annual electricity bill)

With all this money saving tips in mind, I think the most important thing to remember is to remain positive. Every economic recession is part of a cycle, and as with every cycle, it will turn and revert back to positive growth & optimism.

 As Oscar Wilde once said, ‘All of us are in the gutter, but some of us are looking at the stars’.