Section 13sex Tax Deduction Calculator

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How to Use This Calculator

Enter your total building cost — this is the construction cost only, not the land or purchase price. Enter your marginal tax rate (45% is the top rate; check your SARS assessment if unsure). Enter the number of qualifying units you own and how many years you have already claimed.

You must have at least 5 units to qualify. The annual deduction is 5% of building cost. The annual tax saving is that deduction multiplied by your marginal rate. The calculator shows your remaining years and total tax saving still available.

What is Section 13sex?

Section 13sex of the Income Tax Act is a powerful but under-used allowance that lets residential property investors deduct a portion of the cost of their buildings from taxable income each year. It was introduced to encourage investment in new residential stock, and for an investor building a portfolio it can turn a tax liability into a meaningful annual saving. This calculator estimates the allowance you could claim based on the number and cost of your qualifying units.

Most residential property investors in South Africa are not aware this allowance exists. The practical effect is that a portion of your building cost effectively becomes a tax-free return each year, reducing the income tax you pay on your rental profits. Over the full 20-year deduction period, you deduct the entire building cost from taxable income — a substantial benefit for any serious property portfolio.

The Qualifying Requirements

To claim the Section 13sex allowance you generally must: own at least five residential units situated in South Africa; the units must be new and unused; and they must be used in your trade of letting — rented out to earn rental income. The five-unit test looks at your total qualifying holding, not five units in a single block, so units across different developments can count toward the threshold.

The five-unit minimum is cumulative across your qualifying portfolio, which opens an important planning opportunity. An investor who owns three qualifying units and acquires two more new units later triggers the allowance on all five from the point the fifth qualifying unit is acquired. Units held in separate legal entities — a company and a trust, for example — are generally not pooled together for this test, so ownership structure matters. Discuss this with a tax practitioner before structuring a multi-entity portfolio.

How Much Can You Deduct?

The standard allowance is 5% of building cost per year, claimed annually over 20 years. For units meeting the definition of a low-cost residential unit, the rate is 10% per year. Crucially, the allowance is calculated on the building cost only, not the land, since land is not a depreciable asset.

When buying from a developer, the purchase price typically bundles land and building cost. If the split is not specified in the deed of sale, the Act allows a deemed cost basis where the land portion is assumed to be a fixed percentage of the total. Getting the developer to specify the building cost separately in the sale agreement — which many will do on request — allows you to use the actual figure and is generally more favourable.

Over the standard 20-year period at 5% per year, you deduct 100% of the building cost from taxable income in total. On a building cost of R1.2 million across 10 units, that is R60,000 per year in deductions. At a 41% marginal tax rate, that translates to R24,600 saved in tax each year — a meaningful annual return in addition to your rental income and capital growth.

New Units Only — Why Second-Hand Does Not Qualify

The allowance is designed to stimulate new residential supply, so it applies only to new and unused units — typically off-plan or newly built property bought from a developer. A second-hand or previously occupied unit does not qualify, regardless of how recently it was built. Where an investor commissions new construction directly — building a block of flats or cluster development — the allowance can apply provided all other criteria are met. In this case the qualifying cost is the direct construction cost supported by building contracts and invoices.

Recoupment on Sale — The Important Caveat

Section 13sex interacts with the rest of your tax position in a critical way: when you eventually sell a property, the allowances you have claimed are recouped — added back to your taxable income in the year of sale. This recoupment is taxed as ordinary income, not as a capital gain. The result is a larger tax bill in the year of disposal. This does not make the allowance undesirable — the time value of money means annual tax savings now are worth more than a deferred tax cost later — but it must be factored into exit planning. Always model the recoupment impact before selling a Section 13sex portfolio. Confirm eligibility and the full interaction with a registered tax practitioner before relying on the allowance in your planning. Investors building a multi-property portfolio under Section 13sex may also benefit from reviewing how those assets are structured for estate succession. Faraid Hub provides Shariah-compliant inheritance planning tools for SA Muslim investors holding property-heavy estates.

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