Each South African is entitled to a foreign investment allowance of up to R10 million per calendar year. With this mechanism for offshore investment in place, South Africans have the opportunity to purchase property in robust property markets abroad and grow their wealth outside of South Africa.
South Africa: Foreign Investment Allowance and Single Discretionary Allowance
You are entitled to a foreign investment allowance of R10 million per adult per annum, but in order to do so, you must be a taxpayer of good standing. Furthermore, you will require a tax clearance certificate and a Tax Compliance Status PIN Letter from SARS in order to transfer the funds abroad. Over and above the R10 million foreign investment allowance, each South African is also entitled to a single discretionary allowance (SDA) of up to a maximum of R1 million per annum. You do not require a tax clearance certificate to make use of the SDA but you will have to declare it in your tax filing for that year of assessment.
These mechanisms allow for South Africans to invest in offshore property, purchase assets abroad or put money in a foreign bank account. As per South African tax law and for all South African tax residents, anything that generates an income is taxable, including interest earned on money in a foreign bank account.
Australia: Stamp Duty and Land Tax
When it comes to investing in property in South Africa, off-plan property schemes are exceptionally popular. One of the reasons for this is that off-plan property is purchased transfer duty-free. Conversely, any property purchased in Australia is liable for stamp duty. This is a tax levied on all Australian property purchases. The value of the stamp duty is calculated on a number of factors such as the purchase price, the location of the property and the purpose of the loan and is furthermore dependent on which state the property is in. There are certain concessions made in regard to stamp duty but this only applies for properties valued under $5000 (AUD). Generally, your stamp duty increases with the price of the property.
All property owners have to pay land tax; this is paid annually to the state and territory governments. Each state has variable criteria when it comes to how your land tax is calculated. Generally, the amount you pay is calculated on the combined unimproved value of the property you own, however if you are a permanent resident then your main home or primary dwelling is exempt from this.
Australia: Property Rates
As an Australian property owner, you’re liable to pay property rates. These are taxes effected by the local government and are charged in accordance with the laws of the state. The rates are based on the value of your property, and different councils have different methods of property valuation and when they will bill you for the rates. There are a number of rates you may have to pay, depending on the council; these can include general rates, rates for utilities like gas, waste management and storm water management services; as well as special rates which are once-off and unique to the particular council.
South Africa: Capital Gains Tax
Capital gains tax applies to all South Africans whether an individual, a trust or a company. As a South African tax resident, you are liable for taxation on any and all assets inside and outside of the country. Capital gains tax is calculated on all your income for that tax assessment year combined. Based on the final quantum of all your taxable income combined, you will then be taxed according to your tax bracket which can range between 7.2% and 18%.
If you’re unsure of how much your Australian property investment will cost you over and above the purchase price, get in touch with the Invest Australia team who are equipped to assist you in calculating all the costs involved with your purchase.