Thoughts Of The Week
NERSA withdraws private generator rules The National Energy Regulator yesterday withdrew the draft rules, published in April this year, that sought to introduce licencing of every form of home electricity generation, including solar photo-voltaic (PV) panels and backup generators.
The Department of Energy will amend the suggested rules and gazette a revised notice. This is in response to many private individuals and businesses that questioned the need and purpose for such registration. Critics suggested that the department should clarify to what extent the public and commercially interested entities should be empowered to introduce self-sufficiency initiatives, using free natural resources, to meet their daily electricity requirements.
We will keep you updated and provide details of the new suggested rules, once gazetted.
Contact STBB for assistance.
Amendments to the Rules of both the High Courts and Magistrates’ Courts regarding the sale in execution of immovable property came into effect in December 2017. One of these provides for the introduction of a court-imposed reserve price, should it be deemed appropriate in the circumstances. To come to such conclusion, a court must weigh up various factors, such as the market value of the property, the amount owed in taxes and levies and the amount owed to the bank.
In March this year, the Pretoria High Court approved an execution sale of a debtor’s property for R40 000, without reserve. Before the sale, the bank had done what it could to assist the debtor with his financial obligations. The property’s municipal valuation was R480 000.
The court took into account that a sale in execution is a forced sale and, consequently, results in lower prices being obtained. Also, the conditions of a forced sale often render the buyer liable for outstanding rates and taxes, and a buyer may be faced with drawn out eviction proceedings to remove occupants from the property. A reserve price often reduces interest in the sale and may result in the property not being sold at all, which would inevitably prejudice both the debtor and creditor.
The judgment on the above-mentioned Pretoria High Court matter is currently on appeal. However, as suggested by the court, perhaps this is an aspect where Parliament should intervene and issue a policy directive.
Contact STBB for assistance.
Buying property with someone else often makes financial sense. Examples of co-ownership include partners buying their first home together or friends sharing ownership of a holiday house.
Co-owners of a property do not hold separate title to a physically delineated part of the property; each co-owner holds an undivided share in the whole property. This means that all co-owners have to act jointly in decision-making.
In practice, disputes often arise when one owner wants to sell, or regarding maintenance of the property and incurring expenses. Before buying a property, purchasers should seek advice on co-ownership agreements, how property debts will be handled, tax aspects and the best structure to use for the purchase.
Ask a property professional at STBB to assist before putting pen to paper.
Many South Africans are cautious of Capital Gains Tax (CGT) because, essentially, it creates a tax liability when you make a profit on the sale of an asset. It is therefore good news that the capital gains (or losses) made on the disposal of certain assets are excluded from CGT. Some of the important exclusions are:
- Personal-use assets, such as a motor vehicle, a caravan, artwork, stamp collection, furniture, household appliances and other assets used mainly for non-trade purposes;
- Personal-use boats smaller than 10 m in length;
- Lump sum payments from pension, pension preservation, provident, provident preservation and retirement annuity funds;
- Proceeds from an endowment policy or life insurance policy (with minor exceptions)
- Compensation for personal injury or illness
Importantly, on the sale of a South African resident’s primary residence, the first R2 million of the profit is also excluded. Other expenses incurred in respect of the home may also be subtracted from the amount of the profit, thereby decreasing the amount of CGT payable.
To obtain a rough estimate of what your CGT liability will be on the proposed sale of a home and the expenditure that may be subtracted from the profit, speak to your conveyancer at STBBbefore entering into the transaction.
“In my divorce settlement I received 50% of my ex-husband’s annuity gratification. It pays out in a week. Will I be taxed on it?”
Divorcing parties often do not consider tax consequences when settling divorce disputes. Failing to pay attention to the tax implications can have dire consequences, even before the ink has dried on the divorce settlement. It is important to bear in mind that your tax situation is likely to be affected if:
- there is property that is held jointly;
- a joint business or partnership from which the spouses derived an income;
- pension arrangements; or
- interest or rental income received.
Separating assets at the time of divorce can also have capital gains tax implications. It is therefore very important to obtain expert advice to be in a position to properly consider all the possible consequences of a settlement.
Let our Family Law Department and Tax Department assist you.
Should you have a separate will in respect of assets in a foreign country or can you have one will to deal with all assets wherever in the world they may be?
It is possible to have one will which deals with your worldwide estate. However succession law and the procedures which have to be followed with regard to estate administration differ from country to country and it is therefore recommended that a person has a separate will drawn by an expert in the relevant law of each country where he or she has assets.
For assistance, contact us on email@example.com.
According to South African law, both parents have a duty to support their child. This duty encompasses direct and indirect costs and includes educational and medical expenses, food, transport, clothing and accommodation.
But how much must be contributed? The amount of the maintenance is determined with reference to the parents’ financial circumstances as well as the reasonable needs of the child.
The Maintenance Act creates a platform for one parent to apply for a Maintenance Order against the other to enable the first mentioned parent to contribute appropriately towards their child’s expenses.
Contact us on firstname.lastname@example.org should you require assistance in any disputed maintenance claims.
Invoices for municipal services are usually issued after the services have been rendered. Therefore, if invoices for services actually rendered during March 2018 are issued for payment on or after 1 April 2018, VAT will be charged at 14%. VAT on services rendered on or after 1 April, will be levied at 15%.
Charges for property rates will however not be affected as these charges are subject to VAT at the zero rate.
For more on the VAT changes, read here.
The VAT increase coming into effect on 1 April 2018 triggered some tricky questions. One of these is the question what the VAT rate will be in the case of estate agent’s commission payable in respect of a mandate granted to the agent before 1 April 2018, where a sale is completed (all suspensive conditions fulfilled) after this date.
VAT legislation determines that the time of supply is crucially important when deciding on the applicable VAT rate (unless there are exemptions or transition periods). In the commission scenario, there is generally an ongoing supply of services by the agent, that must be apportioned in terms of the transition rules, although the commission is payable on registration of the transfer. Depending on the wording of the mandate agreement, the most transparent way of dealing with the VAT question would be to apply a time apportionment to the calculation. For example, if the mandate was granted on 15 March and a sale completed on 15 April then 50% of the commission carries VAT at 14% and the remainder at 15%.
Did you know that a seller’s contractual obligation to pass transfer of a home sold to the purchaser, is a debt that can prescribe?
In the February 2018 judgment in Frieslaar N.O. & Others v Ackerman & Another the Supreme Court of Appeal once more confirmed the principle. It held that the running of prescription in respect of the transfer of a property commences on the date on which the seller’s obligation to effect transfer becomes due and, therefore, claimable by the purchaser. This date is determined by the specific provisions of the agreement the parties concluded. Generally, the obligation arises once the agreement has become unconditional and the purchase price has been paid or has been secured.
Although it may seem like an odd eventuality, prospective sellers and purchasers should be mindful of the fact that prescription always lurks in the background. Make sure to canvass every aspect of your transaction with your conveyancer.
Contact us at STBB.