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Tax legislation addresses South Africa’s housing shortage

As President Jacob Zuma stated in his state of the nation address this year, 2014 is the deadline for housing in South Africa to be improved. Finance minister, Pravin Gordhan announced in the budget speech that new tax legislation will shift the burden of providing low-income housing to those in need to the municipalities to speed up the housing-delivery process. Now, government has made it easier for employers to give low-income employees housing.

In the past, what would happen when an employer transferred (low-cost) housing to an employee is that a taxable fringe benefit would be generated.

What is a ‘fringe benefit’?
According to the Merriam Webster Dictionary, a 'fringe benefit' is an employment benefit (e.g. a pension or a paid holiday) granted by an employer that has a monetary value but doesn't affect basic wage rates

However, says Sonika van Wyk: legislation business consultant at CRS Technologies, "As from March 2014, if immovable property is given to an employee no fringe benefit will be calculated provided that a number of criteria are met."

These criteria are:

  • The employee's remuneration – for the assessment year before the employee acquired the immovable property (e.g. house or flat) – must have been R250 000 or less per annum.
  • The market value of the immovable property on the date on which it was acquired must be R450 000 or less.
  • The employee must not be a connected person to the employer.

Who would be a 'connected person' to the employer?


Jane works as a trainer. She is employed by her Uncle John's training company: XYZ Training Company. She doesn't report to him directly – she reports to Nicole who is the training manager. If John wanted to let Jane benefit from the low-cost housing benefit, would he be able to do this, considering that they are 'connected people'?

"I don't think that this rule will apply to bigger companies," says Van Wyk, "As it will be much more difficult to police. I feel that they are concentrating more on smaller, family-owned companies."