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Taxman to hit world cup rent sharks hard | South Africa | Norton Rose Fulbright

Taxman to hit world cup rent sharks hard

19 December 2009


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This article first appeared in Pretoria News Weekend

The SA Revenue Service is standing by with hefty tax levies when the new tax season rolls round. Enticing potential cash bonanzas – ranging from R50 000 to more than R300 000 have been advertised by estate agents and accommodation companies for the duration of the month-long 2010 spectacular. But this will come at a price, Sars has warned. These windfalls could easily push taxpayers into a higher tax bracket – in some cases paying 40 percent of their total earnings.

“We are warning taxpayers to be aware of what the implications will be for them – privately and financially. There is no limit to what people can charge soccer fans when they come here, so people need to educate themselves on what their tax situation will be at the end of it,” said Sars spokesman Adrian Lackay.

Rentals for private homes across the country have ranged from a humble R750 a person a night to a staggering R90 000 a person a night for luxury accommodation – which may even include transport, meals and cleaning services.

An average sized home in the south or east of Joburg which sleeps six people could conceivably net more than R130 000 if visitors stay for the entire World Cup. And if a middle- to upper-income house sleeping six in the north of Joburg was rented out at R2 000 a person a night, this could spiral to R360 000 if was let for the entire period.

Andrew Wellsted, a tax expert at Deneys Reitz, said he believed the World Cup would be very profitable for homeowners who let their homes privately.

“Yes, people will be taxed a lot more. It will be shocking for people who have lower- to middle-incomes to suddenly be taxed a hefty amount on their total earnings for the year. People can, however, claim on the expenses incurred in renovating or furnishing their homes for their temporary tenants,” Wellsted said.

Emarie Campbell, 2010 co-ordinator at Seeff estate agents, said the company was making people aware that they would have to declare the extra income, which would be based on their personal tax levels.

Seeff GM Tracy French said they were in the process of confirming inquiries from the international tour operators that they had initially approached. So far Gauteng has been the most popular venue, taking up to 70 percent of the inquiries for rentals.

“Our Randburg office has engaged with a number of tour operators. If all secure their booking we won’t have another house available in Randburg.”

Seeff has about 10 000 beds on offer, which French said was constantly growing as home owners decided to get in on the bonanza. One tour operator that French has been dealing with, however, said that he would only confirm a booking in February. He had asked for a range of homes from R500 a night to R5 000 a night. But the biggest market was for R1 000 to R 1500 a person per night, which has been consistent among all tour operators for the average visitor, he added.

Seeff has implemented a special plan to approach travel agents and groups abroad. They were dealing with those tour operators seeking accommodation for a minimum of 10 days to two weeks. Campbell said that earning potential for individual households depended on the size, services and proximity. Her example was of an ordinary Parkmore three-bedroom, five-sleeper house at R1 000 per personfor 14 days that could bring in R70 000.

Seeff is charging homeowners a 20 percent to 30 percent commission. Other estate agents and accommodation companies have also been approached from overseas. Huizemark estate agents said that in recent weeks they had placed about five adverts, receiving an average of 30 calls a week. Christo Maritz, CEO of accommodation company, WCS Accommodation, said that while they had not yet received any confirmed booking, there had been a high demand for homes.

Norton Rose South Africa (incorporated as Deneys Reitz Inc) joined Norton Rose Group on 1 June 2011.