Rent from our house in SA

[Hawk]

Hi Everyone

We were unable to sell our house in SA so we have decided to rent it out.

We leave SA in April and my question to everyone is what is the best way to get this rent from my home in SA to Oz?

I was thinking of just swiping my credit card in Oz but the exchange card exchange aren't great.

Is there a way of getting this money out every month?

Thanks

[Sunnyskies]

Hi Hawk

Not sure if you are emigrating or merely departing.

On the assumption that you are not formally emigrating in you first year out you can literally transfer as part of your annual travel allowance. Alternatively, you can transfer to a family member and they can send to you as part of their annual allowance. However, those methods are probably not 100% legit, and you probably should get an investment allowance approval permitting you to remit the amount of the rent. The approval is valid for a year at a time.

It is a bit of a pain getting your clearance from the Reserve Bank, but if you have a rental agreement and can indicate how the funds are being earned you should be able to get the approval. You can then arrange for your bank to do the remittance on a monthly basis by eft.

From what others have said CashKows may be able to help to ensure that what you are doing is legit and to pay the least amount of fees for the transfer.

[Sunnyskies]

Also, have a read of this thread which deals with transferring money from SA to Aus. Note the comment on the fine for using a credit card in Aus.

http://www.saaustralia.org/index.php/topic/38628-moving-money/page-2

[HadEnoughofJuju]

Hi Everyone

We were unable to sell our house in SA so we have decided to rent it out.

We leave SA in April and my question to everyone is what is the best way to get this rent from my home in SA to Oz?

I was thinking of just swiping my credit card in Oz but the exchange card exchange aren't great.

Is there a way of getting this money out every month?

Thanks

DON'T just swipe your credit card in Australia. Once you have moved and taken up permanent residence in another country you will be regarded as a non-resident (regardless of whether or not you have done the formal emigration thing) and if SARS or the South African Reserve Bank pick up on your CC use in Australia you will get fined for evading foreign exchanged controls. The best way to get your cash out of the country (if you are not planning on doing the formal emigration thing) is to use a company like CashKows or Exchange4Free to transfer the cash. It may cost you a couple of hundred rand every time you do it but it cheaper than the fines you will pay.

I was warned not to do this by the guy at CashKows as they are busy assisting someone who tried it and got caught and now has to pay a R200000.00 fine.

[HadEnoughofJuju]

P.S. CashKows and Exchange4Free handle all the exchange controls for you.

[MrandMrsK]

we are considering the same thing (ie getting rent from a property here)

What about opening an account (in SA) that is used to receive the rent, and this money is used to pay maintenance, agents, and other house-related costs?

I was thinking of giving my dad or someone power of attorney over this account so that he can oversee the rental and tenants.

I see this as a way of limiting the SA-Oz-SA money shuffle. (its just enough to cover the bond, no point in selling at the mo and making a loss)

besides, witht he exchange rate, we wont see much of it.

Then when we sell the property we can close all of it at the same time

Does anyone have any opinion/suggestion over this?

Thanks

[patrice]

Selling now or later >>

I know a guy who held out for his house price a few years ago, suffice to say, he recently got a verbal offer very close to his original 'price', however, due to the change in exchange rate, he will actually land fewer AU$.

[Sunnyskies]

MrandMrsK, on 12 Feb 2013 - 01:55, said:

we are considering the same thing (ie getting rent from a property here)

What about opening an account (in SA) that is used to receive the rent, and this money is used to pay maintenance, agents, and other house-related costs?

I was thinking of giving my dad or someone power of attorney over this account so that he can oversee the rental and tenants.

I see this as a way of limiting the SA-Oz-SA money shuffle. (its just enough to cover the bond, no point in selling at the mo and making a loss)

besides, witht he exchange rate, we wont see much of it.

Then when we sell the property we can close all of it at the same time

Does anyone have any opinion/suggestion over this?

Thanks

I am not sure what the position is if you are emigrating and your accounts become blocked accounts, but if you are not emigrating this is workable. We basically did the same, except we did not give anyone a power of attorney over the account. We ran everything off email and the phone from here. It was a pain, but it was worth it as the value of our house improved over the time that we rented it out. Just watch out for CGT (both there and here) and keep records of all your receipts etc for tax purposes.

[Jordy]

Just remember that you will need to declare rental income in both South Africa and Australia. You can offset the South African tax paid against the Australian tax required but in my case the profit portion is below the taxable threshhold for South Africa. Therefore as no tax was payable in South Africa, the full profit was added to my Aus income and became therefore taxable in Australia.

Not selling has been my single biggest mistake. When we came over the exchange rate was in the R7's now it is almost R10/$1. Thats a 30% loss and the value has not increased 30%. Should have sold combined with the challenge of managing a property from overseas!!!

[Hugo2]

Good day to all

yes, I am the guy from Cashkows.Com assisting the clients with those awful SARB queries and penalties.

Formal emigration as suggested is one of the best methods to allow easy remittance abroad. Also, do not forget that if you ever sent Au$ or any foreign currency into SA, you can now use that "credit" so created, to remit rental income abroad WITHOUT a tax clearance, but also NOT using a credit card.

Some interesting info on the use of the card vs rest of your annual travel allowance (Sunnyskies: excellent comment, it jogged the mind to list this route): Yes in the year of your departure you can take you full R1m travelling allowance even if it is post departure date. The process differs from bank to bank but it can be done legally. The other part of the DA (discretionary allowance of R1m pa) is that it may also be used as Foreign Investment Allowance (FIA aka R4m subject to tax clearance).

Now this is where the grey are comes in, the R1m in 2nd year of departure may not be availed to as a travelling allowance but now we see more and more learned authors and even bankers suggesting the R1m used as FIA is not restricted. Looking at the forms one has to complete the difference appears to be in the codes used on the form to buy foreign currency. Here comes the issue: Calling the bank they say no yet sending the application to the bank to remit as R1m FIA without tax clearance was approved by one branch, denied by another branch.

I was told there is new rules but they not public and we will be publicly informed on budget day on this webpage: http://www.treasury.gov.za/documents/national%20budget/default.aspx

So before we make decisions and get our bankers all uptight trying to slip through using a different code, lets wait and see the announcements to follow budget speech day (27 Feb 2013 - very late this year, day before tax year end!!)

In the meantime, should you need urgent solutions knowing you can sleep well at night, feel free to make contact with us.

Hugo

[fouche's]

Some comments regarding Australian tax on keeping a property in South Africa.

It is important to get a valuation on or around the date you will become an Australian Tax Resident (normally the date you arrive in Australia to live) as this could be used to calculate the CGT in Australia. I say 'could' as the Principle Place of Residence (PPR) rules may apply if you rent a place in Australia. You could still claim exemption for the sale of the South African residence as your PPR and therefore not pay any CGT in Australia. This exemption is for 6 years so you can rent in Australia fand not pay any CGT on your SA residence provided you sell within 6 years. You can also buy an investment property and still not pay CGT on the South African property. You can only have 1 PPR so say you rented for a year then you bought in Australia you could get the house valued at this date, and only pay tax in Australia on the gain from then to date sold. Often the increase in value (capital gain) in Rands is not a capital Gain in A$. In calculating the gain it’s important to convert the Rand value of the property into A$ at valuation date vs sale date and not merely gain in Rands at the conversion rate. eg a R2,000,000 property at migration date when exchange rate was say R7 to $1 = $285,714 - at current exchange rate of R9, the property would need to sell for more than R2,571,429 after sale costs for there to be a gain. The net rental income will be taxed in Australia and you will get a tax credit for any tax paid in SA.

You will pay tax in South Africa on rental income and CGT

Get some advice with regard to your personal circumstances as to when you intend buying in Australia, how long you intend keeping your SA property etc. I have found that there is often no A$ gain therefore no CGT tax to pay

Louis