Property accounting and tax, done by people who know property

Accounting and tax for property owners, portfolios and managing agents

Property is not just another set of books with different account names. Rental income is taxed differently from trading income, the deductible expense list is narrower than most landlords assume, commercial property carries VAT while residential letting generally does not, and the moment a property is sold a capital gains calculation depends on records that should have been kept from the day it was bought.

PayStream runs the accounting and tax for residential landlords, commercial portfolio holders, property management companies and body corporates. It is a genuine specialism for us rather than a line on a service list, which is the reason it sits alongside payroll and accounting as one of the four things we do.

Where landlords lose money to bad records

• Claiming the bond repayment instead of the interest. Only the interest portion is deductible. The capital repayment is not, and SARS picks this up quickly.
• Treating improvements as repairs. A repair restores what was there and is deductible now. An improvement adds to the property and goes to the base cost for capital gains instead. Getting this wrong in either direction costs money.
• No apportionment on a partly let property. Where you let part of a property, expenses must be apportioned on a defensible basis. Without one, the whole claim is exposed.
• Ring fenced losses that get forgotten. Rental losses can be ring fenced under section 20A in certain circumstances. If nobody tracks the balance forward, the relief is quietly lost.
• No base cost record. Purchase price, transfer duty, conveyancing, bond registration and every capital improvement over the holding period form the base cost. Reconstructing fifteen years of that at sale is expensive, and what cannot be proved cannot be claimed.

Commercial property and VAT

Letting commercial property is a taxable supply, so once rental income crosses the R1 million threshold VAT registration is compulsory and output VAT must be charged on rent and on recovered operating costs. Input VAT on the property's expenses becomes claimable, which is often significant on a commercial building.

Residential letting is an exempt supply, so no output VAT is charged and no input VAT is claimable. Where an entity holds both, an apportionment is required, and getting that method agreed and documented is the difference between a clean audit and a long argument with SARS. Where a commercial property is sold as a going concern with tenants in place, a zero rated transfer under section 11(1)(e) may be available, but only if the sale agreement is worded correctly before signature, which is why it is worth a conversation before the deal rather than after.

Sectional title schemes, body corporates and HOAs

A body corporate has its own obligations under the Sectional Titles Schemes Management Act: an approved annual budget, levy rolls, a ten year maintenance plan, a reserve fund at the prescribed level, and annual financial statements presented at the AGM. Homeowners associations operating as non profit companies additionally have CIPC obligations.

We prepare levy rolls and levy statements, run the administrative and reserve funds separately as required, track levy arrears with an age analysis trustees can act on, prepare the annual budget and the AFS for the AGM, and handle the income tax position, including the exemption available to bodies corporate under section 10(1)(e) and the limits on it where a scheme earns income from outside sources such as antenna rentals or letting common property.

Managing agents and trust accounting

If you collect rent on behalf of owners you are handling other people's money, and it must be accounted for separately from your own. We set up and reconcile trust accounts, produce owner statements showing gross rent, commission, expenses paid and the net remittance, and keep the records in the state a Property Practitioners Regulatory Authority audit expects to find them. Your own commission income then sits in a normal set of business books, cleanly separated.

Portfolios across multiple entities

Property is very often held across several entities: a company for the commercial buildings, a trust for the family assets, and a few properties in personal names from before there was a structure. Each one has its own filing obligations and its own year end, and the loan accounts between them are where things usually go wrong.

We keep each entity clean in its own right, reconcile the inter entity loan accounts so they actually agree to each other, and then produce a consolidated view of the portfolio: income and expenses per property, yield, vacancy, arrears and the debt position. That consolidated view is normally the thing an owner has never had, and it is the one that changes decisions.