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News and media releases: 2009
News and media releases: 2009
| More tax relief with UDZ |
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| 27 January 2009 |
The view from Turbine Square on the edge of Newtown
The amendments are contained in the new Revenue Laws Amendment Bill which was brought before Parliament late last year, and has since been approved. It still, however, needs to be Gazetted. For one, more new buildings may be built in the inner city in the near future. In the past, developers have not really taken up the option of constructing new buildings in the inner city because of the lack of incentives attached to such a venture. "Initially the UDZ was more geared toward encouraging the refurbishment of buildings," confirms Lebo Ramoreboli, deputy director of spatial economic development in the City. Under the UDZ, investors are encouraged to refurbish existing buildings or to build new assets in the inner city and to offset the cost of the development against the taxable income of the company. Of the 91 properties which have so far been completed under the UDZ tax incentive scheme, only one was a newly constructed building – Turbine Square in Newtown. Another 110 buildings are currently being worked on in the inner city of which only five are newly built buildings. Therefore, in order to encourage construction of new buildings the accelerated depreciation incentive has been changed slightly: in the first year the depreciation amounts remain at 20 percent of the cost of the development; following this, depreciation in the following 10 years increases by three percent – to eight percent. Previously this was five percent over the next 16 years. Although there is not a lot of open land available in the inner city, there are a number of dilapidated, abandoned buildings belonging both to Council and private owners suitable for demolition. "We are in the process of pulling them together under the inner city property scheme." Low-cost housingThe new bill also introduces significant concessions in respect of low-cost housing following continued negotiations between the City of Johannesburg and National Treasury, Ramoreboli says, adding that the Inner City Charter commits the City to the provision of low-cost housing.
Upgrades in Hillbrow
If the developer opts to renovate a building for low-cost housing, the depreciation is 25 percent in the first year and 25 percent in each of the succeeding three years. In order to qualify as low-cost housing, the total construction costs of a flat should not exceed R250 000 per unit; and in the case of a house not exceed R200 000, excluding the cost of the land and bulk infrastructure. The monthly rental on low-cost housing may not exceed one percent of this cost. Shortage of housingThe government is also addressing the shortage of housing with the new bill. In the past no tax incentives existed for an employer who transfers a house or apartment to an employee.The bill now makes provision for such a tax incentive if an employer sells the accommodation to the employee on an interest free loan. The employer may then deduct an amount equal to 10 percent of the initial loan amount per annum over 10 years, or as long as the loan arrangement stands. The employer must erect at least five residential units for employees or outside tenants and these must be in the same geographical location. So far, the 91 completed properties have brought investment to the tune of R1,358-billion to the inner city since 2005. With the current construction added, this amounts to investment of R5,194-billion completed or underway, and some 42 000 jobs provided as a result. The City's economic development department is also hoping to increase the UDZ boundary in the near future. The inner city has expanded and economically viable nodes extend all the way to South Gate, Ramoreboli adds. Suburbs which may be included in future include Selby, City Deep and Ferreiras Dorp, she says. The UDZ tax incentive expires on 31 March 2014. |
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