In 2015 C2M Chartered Accountants Inc. published an article on Income Tax Act, Section 13sex. By default C2M became experts and received numerous queries on this subject. This inspired C2M Director, Carel Steenkamp, to write another article: “I have had it with sex!”, highlighting other building allowances such as Section 13quat and Section 13quin.
I have had it with sex!
Article by C2M Director, Carel Steenkamp, CA (SA) RA
If anyone ever asks me another question about Section 13sex of the Income Tax Act I will be forced to punch that person in the Adam’s apple.
While we are on the subject of sex, I think I have figured out how we can consistently beat the All Blacks.Apparently the Kiwis are really awful at sex. An online dating company in the UK surveyed 22,753 of their straight members to find out which country in the world has the best male and female lovers. It turned out that South African men are beasts in the sack – sharing 1st place with Australia (ball tampering aside) and the USA with a hot rating of 8 out of 10. This fact makes me happy and sad at the same time because I used to be an 8 but now, with enough motivation and some stretching, I am probably a 6 at best.
South African women are in a commendable 2nd place – sharing a 7 out of 10 with Germany, India and the UK.
New Zealand men are embarrassingly in the last place with a dismal 4 out of 10. New Zealand woman are also in last place with 6 out of 10, sharing that honour with Australia (ball tampering aside) and Spain.
Ok, so we comfortably outperform the Kiwis in bed, but what has that to do with beating them at rugby you may ask?
Harassing them into submission on the field about their poor performance between the sheets won’t work as I believe the Kiwis realise that as a nation they collectively have the sex appeal of a car crash. As there seems to be a direct correlation between a rugby player’s ability between the 4 white lines and his ability to storm the cotton gin, we simply need to suck more at sex than them – P Divvy knew this when he coached and that is why he has the best record against the All Blacks. It seems that he could reduce the libido of a warm-blooded 23 year old rugby player to that of a 60 year old panda.
Bring back P Divvy!
But let’s stop talking about sex and let’s rather talk about quat or quin. Building allowances can be summarised as follows:
- Section 13 Manufacturing and Research & development buildings (5%)
- Section 13bis Hotel buildings (5% & 20%)
- Section 13quat Buildings in Urban Development Zone (20% & 8%)
- Section 13quin Commercial buildings (5%)
- Section 13sex Residential building units (5%)
- Section 13sex Low-cost residential units (10%)
- Section 13sept Interest-free loans in respect of low-cost residential units (10%)
As an incentive to encourage the private sector to revive and renew urban and inner city areas, Section 13quat: Urban Development Zone (UDZ), was introduced in 2003. The section provides for an accelerated allowance on the capital invested in new buildings and existing infrastructure. The allowance is available to owners or lessors of buildings in demarcated areas and extends to commercial and residential properties. The taxpayers can either erect the building or effect the improvement themselves, or alternatively purchase the building directly from a developer.
The section is quite complex and intricate, setting out a list of stringent requirements that must be met before the allowance can be claimed. Furthermore, the section offers different allowance rates for taxpayers incurring the cost of erection or improvement themselves, those purchasing from a developer and for those cases where the low-cost residential unit criteria is met.
Taxpayers constructing a new or extending an existing, building will be entitled to an 11 year write-off of the full cost incurred. 20% will be allowed in the first year and 8% per annum for the following 10 years. The refurbishment of an existing building will qualify for a 5 year write off at 20% per year.
In cases where the taxpayer has purchased the building from a developer, the taxpayers’ allowance is limited to 55% of the purchase price if the building is new and 30% of the purchase price if a second-hand building was improved by the developer.
The rates for low cost residential units are slightly more favourable. The write off period is decreased to 7 years, with 25% being allowed in year 1, 13% in year 2 to 6 and 10% in year 7. The 55% and 30% limitation if purchased from a developer remains applicable.
The following general requirements must be met in order to qualify for the allowance:
- Building must be owned by the taxpayer
- Used solely for the purposes of trade
- Within an Urban Development Zone
- Erection or improvements must either be to the whole building or a floor area of at least 1000m square
- Certificate issued by Municipality stating that the building is located in a Urban Development Zone
- In cases where a building is purchased from a developer, the agreement to purchase must be concluded after 8 November 2005, and where the developer effected improvements to an existing building, he must have incurred costs which is at least equal to 20% of the purchase price paid for the building
Taxpayers wishing to extend their business operations or invest in property would be well served to investigate which areas have been proclaimed as Urban Development Zones. Communicating with your tax practitioner is of paramount importance to ensure that all requirements to qualify for the allowance are understood and met.
As part of my extensive and very intense research for this article, I decided to Google “sex and buildings” and it so happens that a certain Richard J. Williams wrote a book called Sex and Buildings – exploring whether our changing ideas of the body and sexuality influences the way we experience architecture and view certain structures. Basically the Kama Sutra for architects. If you Google “quat and buildings” you disappointingly get some boring stuff about Urban Development Zones.
Read other articles by Carel Steenkamp CA (SA) RA:
For more information or queries related to Income Tax Act | Section 13’s building allowances, contact C2M Associate, Christiaan Binneman CA (SA)
Christiaan Binneman CA (SA)
With the help of South African icon, Dowwe Dolla, C2M compiled a 3 min video summarising the basic technicalities of Income Tax Act | Section 13 Sex. Note that his video is in Afrikaans. If you cannot open the video, click here to view it on YouTube.