A new Rates Policy is to be implemented nationally under the Local Government Municipal Property Rates Act 2004. It is said to role out on the 1 July 2007 in the Western Cape with Johannesburg following in July 2008 and the other provinces following there on.

Under the new act some property owners may be required to pay higher rates while others may receive a discount in their rates. Owners of sectional title units will now be charged individually on their units and will have to pay rates direct to local municipalities. In the past a unit of the sectional title’s rates where included in the levy.

The rates charge will be based on the market related value of your property. The market value is determined by comparing the selling price of similar properties in the same neighbourhood.

The Act provides for the revaluation of all properties and a property should be re-valued every four years.

What are your rights as the property owner?

Firstly you can challenge the value given to your property if you believe it to be unfair. You can hand your objection to the municipal valuer concerned. If he accepts, the adjustment will be made with 10% up or down of the assessment. If it is more it will be referred to an appeal board for review.

Tax Implications of Speculating and Developing.

In the normal course of events, the sale of a second and subsequent property will attract capital gains tax. However, a clear distinction must be drawn between revenue and capital. If you decide to speculate or to become a developer, this will alter your tax status/liability.

As soon as SARS is of the opinion that you have entered into a discernable business or trade of buying and selling property, you will be liable to pay revenue income tax as opposed to capital gains tax.

It is important that you understand this distinction, as your normal rate of income tax will generally be much higher than the rate of capital gains tax.

If a property were acquired with the intention of making a profit at a later date, then the proceeds on the sale thereof would be revenue. If the property were acquired with the long-term prospect of providing accommodation or as a financial investment it would be counted as capital.

You are strongly advised to seek professional assistance in this regard to ensure that you structure your affairs in the most tax efficient manner possible.