Will the primary residence exclusion apply to a property occupied 3 days a week?
12 February 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: Our client owned an immovable property for 14 years. She
stayed in that house from Friday mornings until Monday mornings; then she
occupied another property from Monday afternoons until Thursday evenings. The
first-mentioned property has now been sold and is the only property in her
personal name. We would like to know whether the primary residence exclusion
will apply to the sale of that property.
A: "Primary residence” is defined in para 44 Eighth Schedule and
requires not only that the person hold an interest in that property which she
uses for domestic purposes, but "ordinarily resides in it as her main
Though the term "ordinarily reside” in the context of a
residence is not exactly the same as ordinarily resident for determining tax
residence, the principles are in our view the same. In Cohen v CIR 13 SATC 362
the court held that the question is on of fact and not of law and must be
answered on the circumstances of each case. SILKE at 8.3.1, relying on UK case
law, rejects the notion that it is a mere determination of time (i.e. is more time
spent there than not). In Commissioner for Inland Revenue v Kuttel  2 All SA 151 (AD)the court
held that ordinarily resident is where the person has his principal home or
"real” home when returning from his or her wanderings.
However, what makes the "primary residence” definition different
is the fact that in addition to requiring that the person ordinarily reside in
it, she must do so as her main residence (i.e. main structure that she
lives in for domestic purposes). The latter may seem to impart a test of time
(i.e. mainly lives there or more than 50% of the time) which in the current
facts would result in the residence not being a primary residence even if this
is the place where she will return to from all her wanderings. Due to this
uncertainty it may well be advisable to apply to SARS for a non-binding private
opinion in terms of s88 TAA. However for the purposes of the provisional
estimate you may have to take a position from the above based on the risks
involved to underestimate the liability and attract penalties in this regard.
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.