Alert for those earning rental income – SARS are watching
With the global online age it is easy for a taxpayer to advertise and rent out part of their home, or investment property, to paying guests. Many people are using online platforms, who can then monitor booking and assist with the logistics in the collection of the rental income. As easy as it is for a home owner to add his property to such an online site, so, can SARS, as the “prospective” renter, find out the details of who has rental accommodation on the market and the going rate per night.
Since the appointment of Edward Kieswetter as the SARS Commissioner on 1 May 2019, there has been a strong drive by SARS to address the matter of non-compliance.
In a recent presentation to parliaments standing committee on finance, Kieswetter was quoted as saying “Taxpayers and traders who negligently, deliberately, aggressively, or criminally stay out of the tax system or do not comply will be detected immediately when non-compliance occurs”.
One of the areas of non-compliance that SARS have identified, are taxpayers who have taken advantage of the easy access to the online platforms available to them, and have been receiving rental income, which they have not been declaring to SARS.
SARS released a media statement earlier this year advising that they are currently improving their system capabilities in order to detect potential defaulters, and have warned they this is an area they will be targeting.
In addition to the online platforms, South African financial institutions, are obligated to provide SARS with details of your banking transactions on a six monthly basis. Should SARS systems get to the point where they can identify patterns of income earned, any undisclosed income will definitely be detected by SARS.
SARS are encouraging taxpayers who have not previously disclosed their rental income to SARS, to approach SARS as soon as possible, making use of their Voluntary Disclosure Programme (“VDP”) to regularise any previous omissions. Depending on the taxable income not declared to SARS and number of years that taxpayer has been in default, submitting a VDP application may mitigate the penalties that SARS may impose if they find you first. Taxpayers could then also ensure that the deductions allowed against rental income are properly accounted for such as : cost of advertising the property, rates and taxes, bond interest, commission fees, cleaning costs, property levies etc..
Failure to declare any taxable income to SARS, may result in severe penalties being imposed by SARS or even criminal action being taken.
In addition to the income tax obligations, it should also be remembered that where you are lucky enough to receive short-term rental income of more than R1 million in a 12 month period, you may also be obligated to register as a VAT vendor and charge VAT on your rentals.
Should you find yourself in a position where you have not declared your rental income, we would suggest that you seek advice as to how to proceed in making a voluntary disclosure to SARS as soon as possible to avoid the payment of penalties.
Our experts