Allowances on rental Property

[ANU]

Hello

My client bought a unit(brand new) from a body corporate for R2.5 million to rent to a tenant in 2014. Can he claim any sort of allowance. If so at what rate & how do we disclose it in his AFS? Is teher any Tax benefits?

[AmithS]

Was it purchased in his personal capacity?

[ANU]

No! They formed a Company with 4 directors who are also the shareholders. The purpose of the company is for property . The unit is rented out (residential purposes) .It was bought from a body Corp.
They have installed airconditioners & a wooden pantry .Both are more than R10 000.00 .TIA

[Andromeda]

Hi Anu. There is no allowance.

The company will be required to pay tax on it's profit, which is calculated by deducting allowable expenses from rent received.

The air conditioner is a capital expense, so you cannot expense it. The wooden pantry is also a capital expense in that it is an improvement to the investment property.

[AmithS]

Hi Anu. There is no allowance.

The company will be required to pay tax on it's profit, which is calculated by deducting allowable expenses from rent received.

The air conditioner is a capital expense, so you cannot expense it. The wooden pantry is also a capital expense in that it is an improvement to the investment property.

Hey Andromeda, so in this case they would depreciate the air condition and pantry as assets?

[Andromeda]

The air conditioner, in the AFS yes, and it is also subject to wear and tear.

The pantry no. It is an improvement to the Investment Property. Investment Properties, which are held for rental and capital appreciation, are not depreciated and are also not subject to wear and tear for tax.

[ANU]

Thank you !