Rental income must be declared

If you own one or more investment properties, it is important to note that any rent you receive forms part of your income and must be declared to the SA Revenue Service (SARS) on your annual tax return.

Deliberately not declaring it is effectively tax evasion and thus a serious contravention of the Tax Administration Act that could lead to you being convicted of a crime and having to pay a hefty fine or go to jail for up to five years.

What is more, as SARS continues to improve the efficiency of tax collection, it is increasingly unlikely that any such non-declaration and or under-declaration will remain undetected.

However, it is not all doom and tax gloom for landlords, because they are allowed to deduct all expenses that are related to the letting of the property from the gross rental received when calculating the taxable amount of income received from a rental property. 

These expenses typically include any interest paid on a bond, homeowners' insurance premiums, the municipal rates paid for the year, any amounts paid to repair and maintain the property and any levies paid.

 In addition, if you are retired and not earning any other income, it is just possible that your rental income will fall below the tax threshold for your age group and that you will have no tax liability. The tax thresholds are currently R91 250 a year for individuals under 65; R141 250 for people aged 65 to 75 and R157 900 a year for those over 75. 

But in all instances, you will still need to submit a tax return by the relevant deadline each year, or risk having to pay an administrative penalty.

The Act also empowers SARS to issue tax assessments based on estimates to people who regularly fail to submit returns - and to charge penalties and interest on unpaid taxes.

So if you have not previously declared your rental income, you should seek the help of an accountant or tax consultant to approach SARS and voluntarily rectify the situation as soon as possible.