When can you apply the building allowances for income tax purposes as per section 13ter and section 13sex of the Income Tax Act?
NB: The deduction previously recognised under section 13ter for residential buildings/units is now provided for under section 13sex.
Section 13ter of the Act applied to residential units acquired, or the erection of which commenced, on or after 1 April 1982 and before 21 October 2008. Section 13ter of the Act provided for a depreciation regime that allowed a deduction equal to 12% of the cost of the residential unit in the first year in which it was let or occupied, and a further 2% of the cost deductible in each of the succeeding 44 years.
Section 13sex of the Act applies to any residential unit or improvement to a residential unit acquired, or the erection of which commenced, on or after 21 October 2008 and replaced the depreciation regime under section 13ter of the Act. Section 13sex of the Act now provides for a 5% depreciation allowance per annum over 20 years, and applies only to new and unused residential units or improvements.
Both section 13sex and section 13ter of the Act require that, in order to enjoy the building allowances available under these sections, the taxpayer must own at least five residential units and the residential units must be situated in South Africa. In terms of section 13ter of the Act, the residential units were required to be used by the taxpayer to be let to a tenant for the purpose of deriving a profit for the taxpayer to be occupied by a bona fide full-time employee of the taxpayer. Section 13sex of the Act, on the other hand, requires that the residential units or improvements are used by the taxpayer solely for the purposes of a trade carried on by the taxpayer.
Refer to: https://www.thesait.org.za/news/309733/No-looking-back-for-section-13sex-of-the-Income-Tax-Act-.htm
Also see SARS Guide: https://www.sars.gov.za/wp-content/uploads/Ops/Guides/LAPD-IT-G18-Guide-to-Building-Allowances.pdf