| | | Hi [NAME] At the beginning of the year, I said that this is going to be the year for building solid and trusting relationships. Relationships are not just one sided. To encourage interaction between us and you, we have started a group on Facebook. [NAME], please become a fan and get your friends to become “fans” too! February is budget month! Nothing was cut too drastically and fortunately nothing was drastically increased either. Which led me to question where the additional funds to service our deficit were going to come from? Perhaps “lifestyle audits” are a bigger issue than its mere little 1 minute introduction in the budget speech. | | | | | | | 
| | Will your lifestyle survive an audit? | | | | | Pravin Gordhan in his first budget speech didn’t make any changes to the existing tax policies that will directly or dramatically affect the property industry. However, the introduction of “lifestyle audits” may dampen the spirits of those potential property buyers whose tax affairs are not up to scratch. | | Even though “lifestyle audits” have been hyped in the media recently, no where in his speech did Pravin Gordhan limit such audits to loud-mouthed politicians and government officials. Lifestyle audits, a means of matching the lifestyle of taxpayers with their tax return, have been successfully employed by the Internal Revenue Services (IRS) in America for many years and have proven to be an efficient way of identifying those who are “creative” in declaring their taxes. Currently, when purchasing a property the attorney attending to the transfer of the property has to obtain a tax clearance certificate from SA Revenue Services (SARS) | 
| | | for the agent, the seller and the buyer. Should the tax affairs of any of the parties to the transaction not be up to date, they will have to “pay up” before SARS will allow the transaction to proceed. This opens the door to the effective implementation of “lifestyle audits”. How can you purchase a property of R3 000 000, when you are declaring an income of only R45 000 per month? Even if you obtained a 100% mortgage bond, your income must be between R80 000 to R100 000 to qualify for such a bond. And SARS is not oblivious to this! If your income doesn’t match you lifestyle of choice, SARS will assist you in identifying such income, taking their fair share of course. If reading this gives you palpitations, don’t fear. All is not lost yet! Pravin Gordhan has given you a window period of a year as from November 2010 to “come clean”. However, if you head remains stuck deep in the sand thereafter, expect to pay a 200% penalty fee if you’re audited. Suze Orman once said “the more tax you pay, the richer you are getting”. In order to obtain true financial freedom and grow your asset base, you need to rid yourself of your guilt shackles. Avoid having you lifestyle questioned by living within your means and “paying to Caesar what is due to Caesar”. | | | | |
| | From the “horse’s” mouth | | | | | 
| “But there are those who evade their responsibility, and further steps are under way to tackle this tendency. Getting everyone to pay their fair share is a critical means of keeping the overall level of tax rates moderate. Government will take further steps to reduce tax avoidance and tax structuring by tightening company car and other fringe benefit rules, and through measures to ensure that employer deductions are fully reflected in the gross income of employees. Steps will be taken against several sophisticated tax avoidance arrangements, such as the use of transfer pricing and cross-border | | mismatches. Using third party information, and targeted lifestyle audits, SARS will take a much tougher approach towards cash-based businesses who avoid VAT. Tough action on firms who do not pay over PAYE and other taxes, even though these have been deducted from employees. The taxpayers of South Africa are not lenders of last resort and SARS is not a bank!” “SARS has always shown leniency and understanding for those who come forward voluntarily to disclose prior non-compliance. In line with international practice, this will be formalised in a Voluntary Disclosure Programme which will exist for 12 months from November this year. Non-compliant taxpayers may use this window of opportunity to disclose and pay undeclared tax liabilities at a reduced interest charge and without penalties. Consideration will also be given to align exchange control violation penalties with this voluntary disclosure opportunity.” | | | | 
| | Connecting with you | | | | | | Have you ever wondered whether you would qualify for finance? Is the property market changing? How will the budget speech affect you? What is new? What is no longer applicable? Is it a bull or bear market? Etc… Be informed, be up-to-date, be trendy! Become a fan of Property Factor on Facebook. Let’s interact. Let’s build a community. Let’s us grow together!
| | | | 
| | | | | | |
| | Often a truth is said in jest | | | | | | | “ Even if you dog does do “his business” in your basement, you still can’t deduct it as office space” | | | | | | |
| | How can we assist you? | | | | | | Self-employed individuals are more vulnerable to the possibility of “lifestyle audits”. Before purchasing a property, please allow us to assess your financial statements, identifying any possible problematic areas and your potential to obtain mortgage finance. | | | | | | | | | | | | | | | | | |
| | Did you know? | | | | | | 
| That in 1930’s the IRS used “lifestyle audits” to put Al Capone behind bars? He was never convicted of racketeering, but on tax evasion. | | | | | | | | |
