The metaphorical train, which officially leaves the station on June 30, will see the end of Section 12J’s sunset clause, marking the successful end of this tax incentive in South Africa.
Fortunately, SARS gave South African taxpayers one last chance to take advantage of this incredible tax exemption by giving them the opportunity to write off up to R2.5 million in taxable income for the 2022 tax year. Want to know more? Flyt Property Investment, a Cape Town-based property development and investment team, reveals everything you need to know.
What is section 12J?
There is no doubt that South Africa has had an uphill battle against unemployment. To help fight the steadily rising unemployment rate, the National Treasury and SARS have sought to inject much-needed funds into small and medium-sized businesses, with the aim of facilitating job creation. In turn, the exemption offers investors the opportunity to benefit from an immediate tax deduction equal to 100% of the amount they have invested. Through the Section 12J initiative, around R10.34 billion has found its way into small businesses, creating between 9,000 and 10,500 jobs, with investors also benefiting from this tax exemption.
For example, assuming you are a paid PAYE employee: If you earn R1 million in a given tax year and invest R1 million in a 12J business in the same tax year, SARS will see your income theoretically drop from R1 million to R0. You will then be entitled to a tax refund on the million R1 they have already paid, + -300,000 Refunds. The more you earn, the more tax you would have paid and the better the incentive, with top taxpayers saving 45% of their investment.
Sprinkle with Flyt Magic
In an effort to solve the 12J property puzzle, the overriding intention of Flyt Property Investment was to enable investors to purchase units in various developments, while enjoying a healthy tax deduction. Simply put, they wanted to create an opportunity for SARS to fund up to 45% of the purchase of the property for the investor, allowing them to receive a huge reduction in the funding required for the investment, with the effect drive for these developers being higher sales rhythms and the ability to make a profit through their core business – real estate development.
The last few years have been busy for the Flyt team. What started as an exploratory exercise in 2019 to see how they could combine what was historically their ‘bread and butter’ – residential / hotel real estate development – with the SARS Section 12J tax incentive (which was at that time). a newly found revelation) has since evolved into a thriving joint venture with Anuva Investments, one of the first and most trusted Section 12J venture capital firms with a solid track record of seven years.
Since the launch of Flyt Select, Partnership and Hospitality Funds in early 2020, under unprecedented conditions for the real estate market, Flyt has launched a bridge financing activity, sold the four developments they have brought to the market (around 295 units) and established relationships with some 400 new individual investors, saving them over R200 million in taxes.
As proud as Flyt is of the progress they have made to date, very little would have been possible without what Anuva Investments CEO (Neill Hobbs) describes as “hands down the best tax cut opportunity imaginable. “.
What happened first? The chicken or the egg?
Still with us? If you’ve followed through and are able to understand the logic behind using SARS to fund your real estate investment, what’s stopping you?
There is one big hurdle you may need to overcome: money. Before you can use your tax to invest in real estate, you must first invest your taxable income of one million Rand in cash by the deadline, which will allow you to claim your tax refund deduction of 300,000 rand. Unfortunately, not everyone has this amount of money lying around.
Add Flyt 12J (Pty) Ltd to your investment arsenal. Registered credit provider and subsidiary of Flyt Property Investment, Flyt 12J provides investors with bridging loans to invest in the 12J company, helping them to facilitate their tax deductions before the June 30, 2021 deadline and address the need for have the money. in the front. Once the investor receives the SARS tax refund, these funds, along with the home loan, are used to purchase the unit – a game-changer!
So what’s the catch?
- Property cannot be inhabited by investors for the first 5 years
- The property must be furnished * and managed on a short-term basis
Fortunately, all Flyt units come fully furnished and offer an on-site operator in all of their developments.
You can’t get a home loan, so find a partner.
A good number of taxpayers, although in the highest tax bracket, have been reluctant or unable to obtain a home loan on their own due to various commitments. This conundrum gave birth to the concept of what is now the full-fledged Flyt Partnership Fund, R150 mil strong.
The principle of the partnership fund is simple:
- You, the investor, bring 35% of the investment to the table
- Flyt brings the balance (65%) in the form of a long-term loan (Flyt acts as bank)
- You benefit from 100% tax deduction (up to 45% reimbursement in reimbursement)
- The total 100% is intended for the purchase of properties managed in the fund
- Flyt and the investor share the profits from the sale of the property in five years.
The net effect is that investors simply bring their tax to the table as a contribution, a tax they would normally never have access to. and use to invest alongside Flyt as an aligned partner in quality real estate investments. You don’t have your 35% upfront? Don’t worry, you can borrow it from Flyt and pay it off on your tax refund.
So kill the suspense, what’s on offer?
Upper East Side
Direct ownership in the Upper East Side, a mixed-use neighborhood on Brickfield Road, Salt River, is now available to real estate investors. 183 sectional studio and one-bedroom title units are available through the Flyt Select Fund, from R734,000 to R3,534,000.
Investors will also appreciate a guaranteed return of 7.5% over five years (after all costs). The first three years are supported by a master lease with Spear Reit Limited, years 4 and 5 are guaranteed by Anuva Investments. The units will continue to be fully managed by Multi Rooms Management. Owners will also benefit from seven days of personal use of their accommodation with up to 30% off accommodation rates throughout the year.
One Thibault, the highest residential development in Cape Town
This internationally award-winning modernist masterpiece dares to stand out, rising diagonally across the city skyline, opening up new vistas of the harbor to the east and Table Mountain to the west.
Flyt Property Investment presents the unique opportunity to invest in One Thibault via the Flyt Select Fund, offering bespoke luxury apartments ranging from the 15th to the 20th floor, from 895,000 R.
The 180 serviced apartments are fully managed by an on-site team, Wink Aparthotels. Investors have access to a multitude of benefits, including:
- Furnished apartments at no additional cost
- Quality tenants who “tick all the boxes”
- Lower financial risk
- Higher returns with the managed apartment solution
- No administrator
1st 6% year-round rental guarantee
The Admiral Beach Hotel and Apartments – Struisbaai
Invest in the southernmost tip of the African continent, where the Atlantic and Indian Oceans meet. As a desirable location, few destinations are more spectacular than the Overberg region, including Struisbaai and Cape Agulhas, being the southernmost tip of Africa and home to the Admiral Beach Project.
The apartments will consist of 1, 2 and 3 bedroom units, with direct access to the beach. Investment in The Admiral will be available to investors through the Flyt Select Fund.
Flyt Partnership 2022
As an extension of their huge success, SOLD OUT Flyt Partnership Fund, they are launching the Flyt Partnership 2022 Fund. This new property investment fund aims not to miss the final Section 12J opportunity by allowing you to bank your 2022 income or corporation tax in our Section 12J fund and wait behind the scenes for the next exceptional real estate investment from Flyt to become available. However, here are a few things to remember:
- Subscriptions to be capped at R300 million
A 5% deposit guarantees a tax deduction of R1 million.
About Flyt Property Investment
Flyt Property Investment is a Cape Town-based property development and investment team committed to finding opportunities that challenge the status quo. They work in the public domain on spaces that have the potential to make a difference. They never fear complex problems and believe in finding solutions from within, opening up opportunities through innovation, taking a different angle, thinking intelligently and sideways.
Flyt buy, develop and add value to the property through joint ventures and independent projects. They maximize return by performing rigorous project evaluations up front, co-investing in the work they believe in, and tightly managing their business. They currently have five projects going on and their pipeline is very exciting. They stuck to their recipe for creating wealth for their shareholders, while contributing positively to the built environment and progressive landscape of Cape Town.