Transfer Duties, new legislation and what you need to know!
Category Legal Matters
Buying or selling a property can be a daunting experience, especially regarding the legal jargon and associated costs. In South Africa, one of the costs that are often incurred is transfer duties. In this article, we will explore what transfer duties are, when they are applicable, when they aren't, and how to calculate them.
What are transfer duties, and when are they applicable?
Transfer duties are taxes payable to the government when a property is transferred from one homeowner to another. These duties are typically calculated based on the property's value and payable by the buyer. Transfer duties are applicable in South Africa when a property is sold or transferred, and they are intended to help fund the government's infrastructure and social development projects.
New legislation revolving transfer duties in South Africa
In 2020, the Rates and Monetary Amounts and Amendment of Revenue Laws Act of 2020 was passed, changing how transfer duties are calculated. Before this new legislation, transfer duties were calculated on a sliding scale based on the property's value.
However, the new legislation introduced a flat transfer duty rate of 8% for all properties sold or transferred for R1 million or more. Properties sold or transferred for less than R1 million are still subject to the sliding scale, with lower rates being applicable for properties with lower values.
Transfer duties vs transfer of costs, what's the difference?
It is important to note that transfer duties are different from transfer costs. Transfer costs are the costs associated with the legal transfer of ownership from one homeowner to another, such as conveyancing, deeds office, and transfer fees. Transfer duties, on the other hand, are the taxes payable to the government.
How to work out what is payable
As mentioned, transfer duties are payable by the property buyer and calculated based on the property's value. To work out what transfer duties are payable, you can use the following formula:
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For properties with a value of R1 million or less: Transfer duty = Property value x (rate of transfer duty for that value bracket)
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For properties with a value of more than R1 million: Transfer duty = (Property value - R1 million) x 8% + (rate of transfer duty for the value bracket below R1 million)
It is important to note that the transfer duty rates for each value bracket are subject to change, so it is always advisable to consult with a legal professional or real estate agent to get the latest information.
Overall, using an online bond calculator tool like Ooba can be helpful for clients interested in working out transfer costs. However, clients should remember that using such tools is only one part of calculating what is payable and should also seek professional financial advice before making any investment decisions.
Situations when transfer duties are not applicable
There are certain situations when transfer duties are not applicable in South Africa. These include:
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When the property is sold for less than R1,000
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When the property is sold between spouses or parties in a marriage or civil union
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When the property is sold to a registered non-profit organisation
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When the property is transferred due to the owner's death, and the property is transferred to an heir or executor of the deceased's estate.
With the new legislation in place, it is essential to consult with a legal professional or real estate agent to get the latest information on the rates of transfer duty and any other associated costs.
Contact Ikonic Real Estate today.
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If you are looking to live in Silver Lakes Golf and Lifestyle Estate, Silver Stream Estate, Lombardy Estate & Health Spa, The Ridge Estate, Six Fountains Estate, or Willow Acres Estate and surrounding areas, then Ikonic Real Estate is your preferred property practitioner to assist you in all aspects of the selling and buying process.
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Author: Bryce Anderson