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Can you get a deduction on the rent paid for your temporary residence?

05 February 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: I have a taxpayer who is currently being audited by SARS. He previously resided in Johannesburg and sold his primary residence to move to Cape Town. Whilst his new house in Cape Town was being constructed, he rented out the primary residence in Johannesburg for R 36 000 per month prior to the sale of the property being finalised. He also paid rent on a property he temporarily lived in while in Cape Town during the period that his primary residence in Johannesburg was being sold.

Can the rent paid be claimed as a deduction against the rental income received? SARS is taxing him on the rental income received but is unaware that he also had rental expense during this period.

A: In our view the CPT rental expense is not causally linked to the JHB rental income in that it was not incurred for the proposes of producing rental income, but the income was rather a passive result of the decision to move to CPT. The CPT property was merely leased to provide accommodation while the house was being built.

We are therefore of the view that section 11(a) of the Income Tax Act would not apply to the lease expense of the CPT property.

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


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