The Minister of Finance, Malusi Gigaba delivered the National Budget Speech for 2018 on 21 February.
We have extracted some of the more salient points as they affect our clients:
From 1 March 2018 the dutiable value of an estate exceeding R30 million will be taxed at a rate of 25 per cent instead of the current rate of 20 per cent.
The amount of donations exceeding R30 million will be taxed at a rate of 25 per cent instead of the current rate of 20 per cent.
Estate duty is a form of tax that is levied on the deceased estate. The purpose of estate duty is to tax the transfer of wealth (assets) from the deceased estate to the beneficiaries.
The estate of a deceased person is subject to 20% Estate Duty, after taking into account a deduction of R3.5 million against the net value of the estate.
If the total net value of the estate is R4 million, Estate Duty will be dutiable on 20% of the amount exceeding R3.5 million which amounts to R100,000 (20% of R500,000).
In line with the latest budget speech, an estate which has a net value exceeding R30 million shall be taxed by 25% after the R3.5 million deduction.
Budget speech highlights that have an influence on the property market
There are no changes to transfer duty, the capital gains tax exemption on a primary home or the effective tax rates for capital gains.
The increase in VAT and the below inflation tax relief on personal income tax, and the increased fuel levies – will have a negative impact on the consumer's finances. This will indirectly impact property affordability.
VAT is charged on the price of the property where the seller is a VAT vendor, on the transfer and bond registration fees and on the agent's commission.
The water crisis in Cape Town is the major talking point of the moment. Severe drought conditions are affecting large parts of the country, and it is placing extreme strain on the supply of water to nearly 4 million people in the City of Cape Town.
People are asking what developers are doing about it. Developers are under pressure to incorporate water-wise features in new developments.
We need to conserve water as was mentioned in this year's budget speech; National government will continue to work with municipalities to respond effectively to the water crisis.
Government stands ready to provide financial assistance where necessary:
The dumping of plastics into our oceans and endangering our marine life is also considered to be a threat to our country's economy and sustainability.
Minister Gigaba also confirmed that the Department of Environmental Affairs would shortly publish a policy brief to broaden the scope of environmental fiscal reform, exploring regulatory measures to improve water resource management, mitigate the emission of pollutants and encourage recycling to reduce waste, such as plastics.
Safety is a key consideration for anyone looking to buy property. Nobody wants to live under a constant threat of danger. You want to be assured that your valuables and your family is safe.
The budget speech confirmed that over R200 billion will be specifically allocated towards peace and security to build a safer country.
Spikes in investment in property directly relate to confidence in the economy.
A bad economy makes it harder for people who want to buy property to get loans for bonds, even though the banks are willing to grant them.
R200 billion has been allocated specifically for economic development to grow our economy inclusively.
Minister Gigaba also mentioned that, "The Integrated Urban Development Framework sets out government’s policy commitment to improving the productivity of South Africa’s urban areas. Let all urban development stakeholders work imaginatively to transform township economies. Let us think beyond car washes and spaza shops, important as they are, and find ways to foster productive, high value economic activity in townships owned and managed by township residents..."
If government can help improve the quality and productivity of our urban areas, it will play an important role in preserving and improving infrastructure in these areas, as well as enhancing property values.
The focus of this year's budget speech was essentially investing in the education of our future leaders, and property buyers.
With a better-educated generation and an ambitious youth, more citizens are enabled to get jobs, and more importantly are equipped to create more jobs for the future.
If the government is able to convert this plan to action- it will undoubtedly lead to an increase of first-time-home-buyers and a higher demand of rented properties.
Get the latest updates in your email box automatically.