Section 13sex Tax Deduction Calculator
Calculate your annual SARS tax deduction for owning 5 or more new residential rental units.
Quick answer: Section 13sex of the Income Tax Act lets investors with 5 or more new residential rental units deduct a portion of their building cost from taxable income each year — up to 100% of the qualifying cost over the allowance period. It was introduced to encourage new residential rental stock in South Africa (SARS).
Section 13sex Calculator
5% of building cost per year for 20 years — for investors with 5+ new residential units
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How to Use This Calculator
- Total Building Cost (excl. land)Enter the construction cost only, not the land or purchase price.
- Your Marginal Tax Rate (%)Enter your marginal income tax rate. The top rate is 45%, check your SARS tax bracket.
- Number of Residential UnitsEnter how many qualifying units you own. You must have 5 or more to qualify.
- Years Already ClaimedEnter 0 if starting fresh, or the number of years already claimed, up to a maximum of 20.
- Click Calculate My Tax SavingReview your annual deduction, remaining years, and total tax saving still available.
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Faraid Hub ↗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.
| Requirement | Detail |
|---|---|
| Minimum units | 5 or more qualifying residential units |
| Unit type | New and unused only — off-plan or newly built |
| Location | Must be in South Africa |
| Use | Used in your trade of letting (rented to earn income) |
| Standard rate | 5% of building cost per year |
| Low-cost unit rate | 10% of building cost per year |
| Deduction period | Maximum 20 years (100% of building cost total at 5%) |
| Land cost | Excluded — deduction on building cost only |
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.
Frequently Asked Questions
There is no legal limit on the number of properties an individual or company can own in South Africa. However, the tax implications scale significantly with portfolio size. Investors who own five or more new or unused residential units used for residential letting may qualify for the Section 13sex depreciation allowance — 5% of building cost per year for up to 20 years (10% per year for low-cost units). Beyond tax structuring, holding multiple properties in a personal name increases personal liability exposure, which is why larger portfolios are often held in a company or trust with appropriate legal and tax advice.
Section 13sex of the Income Tax Act is an annual allowance that lets residential property investors deduct a percentage of their buildings’ cost from taxable income. It rewards investment in new residential units used to earn rental income, and can produce a significant yearly tax saving for investors who meet the requirements.
You generally need to own at least five new and unused residential units situated in South Africa, all used in your trade of letting. The five-unit test applies to your total qualifying holding, so units across different developments can count together once you reach five.
The standard allowance is 5% of the cost of the building per year. For units that qualify as low-cost residential units the rate is 10% per year. The allowance is calculated on the building cost, not the land, and is claimed annually. Confirm the exact figures with a tax practitioner.
No. The allowance applies only to new and unused residential units — typically off-plan or newly built property bought from a developer. A previously occupied or second-hand unit does not qualify, because the provision is designed to encourage new residential supply.
A low-cost residential unit is one whose cost falls within the threshold defined in the Income Tax Act and which meets the related rental conditions. These units attract the higher 10% annual allowance instead of the standard 5%. The cost thresholds are set in the Act, so confirm the current limits with SARS.
Any taxpayer — individual, company or trust — carrying on a trade of letting residential property can qualify, provided they own at least five new and unused residential units in South Africa used to earn rental income. The way it benefits you depends on your tax structure and overall position.
No. The allowance is calculated only on the cost of the building, not the land it stands on, because land is not a depreciable asset. Where you buy a new unit and the building cost is not stated separately, the Act provides a deemed-cost basis to determine the qualifying amount.
The units must be used in your trade of letting. Short, ordinary vacancies between tenants generally do not disqualify a unit that is genuinely held for letting, but a unit never let or held for private use would not qualify. Get specific advice if a unit has been vacant for an extended period.
No. The five-unit requirement applies to your total qualifying holding, not to a single building or development. Units spread across different schemes and locations can be added together to meet the threshold, as long as each is a new and unused residential unit used in your letting trade.