Investing is a great way to grow and maximise your wealth if you do it right. There is, however, a drawback regarding all types of investments – taxes! Taxes are unavoidable, but you will pay far less tax on the money you make from certain investments, like property, than from others.
If you own bonds, have cash in the bank, or hold unit trusts, any interest above R23 800 that you earn annually on any of these will be taxed.
You are taxed according to your income tax bracket, and in most cases, you are taxed at the end of every tax year. This means there is an annual drain on your investment of anywhere between 18% and 45% per year.
Dividends are payments you receive as a shareholder of a company. Dividends tax is the tax you owe on that payment. The company withholds the tax portion of the dividend payment when it makes the payment. So it is the company’s responsibility to pay this tax, not yours. This tax is levied every time a payment is made, which is usually every quarter. So again, there is a drain of 20% on your investment four times a year!
A capital gains event is triggered when you sell all or a part of your investment, for example, if you sell a property or units in a unit trust. If the price of the units has risen since you invested, this increase in value is known as a capital gain or a capital loss if the value has declined.
This tax, of up to 18%, is levied every time you sell part of or the whole investment. In the case of unit trusts, this depends entirely on how often you buy and sell. But in terms of property, you only pay this tax once. That is why property is an excellent investment in terms of taxation!
Capital gains tax on property is only payable once you sell! An estate like Lemon Tree Apartments in Pretoria is a great example! If you buy an apartment for R805 000 right now, you can sell it for an estimated R939 000 two years later and only pay 18% taxes calculated on the difference in the value of R134 000. There are no continuous tax payments that force you into difficult financial situations, making it a far more stable investment for you! If you are looking for property for sale in Pretoria East, contact us at Lemon Tree Apartments today!