Tax on Rental Income in South Africa: What Landlords Should Know

By / September 22, 2025

Owning a rental property in South Africa can be a steady path to wealth. It can also introduce a set […]

Tax on Rental Income in South Africa What Landlords Should Know

Owning a rental property in South Africa can be a steady path to wealth. It can also introduce a set of tax rules that are easy to overlook when you are focused on finding good tenants and keeping the geyser from bursting. This guide sets out, in plain English, how rental income is taxed, what you may deduct, when provisional tax kicks in, how losses are treated, and the key differences between long-term residential letting and short-stay “commercial accommodation” (for example, Airbnb). It closes with worked examples, a checklist, and answers to common questions — so you can file accurately and pay no more tax than is legally due.

1) What counts as “rental income”?

For individuals, rental income is any amount you receive (or that accrues to you) from letting out property. In most cases this means residential accommodation such as a house, flat, garden cottage, or even a room in your home. It also includes:

  • Monthly rent (including any amounts you are entitled to receive, even if a tenant pays late).
  • Lease premiums and similar upfront amounts.
  • Recoveries that are part of the lease, for example if your lease says the tenant must pay a fixed additional amount for fibre, parking, or furniture.

If a tenant pays a deposit, treat it as a liability while it is refundable. If it is forfeited, it becomes income in the year it is forfeited.

Important: South Africa taxes worldwide income for residents (subject to specific exemptions), so if you are tax-resident in South Africa and you let a property in another country, you must still declare that rental figure and then deal with any foreign tax credits. Non-residents are taxed on South African-source rental income.

2) Where rental income fits on your tax return (ITR12)

On your ITR12, local rental income is declared in the “Local Business, Trade and Professional Income” section under the dedicated Local Rental container. SARS uses source codes (for example, 4210 for profit, 4211 for loss) to process rental results.

Keep the following on hand when you file:

  • Property address and description,
  • Period let during the year of assessment,
  • Gross rent received or accrued,
  • A breakdown of deductible expenses (see Section 4),
  • Proof and schedules for any wear-and-tear claims,
  • If jointly owned, each owner’s percentage share (see Section 8).

You must keep supporting records for at least five years after submission (longer if an audit or dispute is ongoing). That means leases, invoices, bank statements, levies statements, municipal bills, insurance schedules, bond statements, and your calculation schedules.

3) VAT: residential letting vs short-stay accommodation

For most landlords, no VAT is charged on rent because the letting of a “dwelling” under a lease is an exempt supply. That also means you cannot claim input VAT on expenses linked to an exempt supply.

Short-term accommodation (guest houses, B&Bs, holiday lets, many Airbnb set-ups that include “board and lodging” with domestic goods and services) is usually “commercial accommodation” for VAT purposes. If you carry on that enterprise and your taxable supplies exceed R1 million in any 12-month period, you must register for VAT. If you are registered, you charge VAT on qualifying stays and may claim input VAT on related costs. There are special value-of-supply rules for long stays (for example, the 60% rule when a guest stays for more than 28 days with domestic goods and services included).

Practical implication: If you run a serviced short-stay operation with cleaning, linen, breakfast, and booking systems, you are very likely in “commercial accommodation” territory. If you sign a normal residential lease (six or twelve months, quiet enjoyment, no services), you are almost certainly supplying an exempt dwelling. Classify correctly — it determines whether you charge VAT and whether you may claim input VAT.

4) What expenses are deductible against rental income?

South Africa applies the general deduction formula. Expenses are deductible if they are actually incurred in the production of rental income and are not capital in nature. In practice, these are commonly deductible:

  • Rates and taxes (municipal property rates),
  • Body corporate / HOA levies,
  • Interest on your mortgage (bond) used to acquire or improve the income-producing property,
  • Repairs and maintenance (to restore the property to its original condition),
  • Insurance (building and, if applicable, household contents for furnished lets),
  • Agent or management fees, advertising, and legal fees for debt collection or evictions,
  • Security, gardening, cleaning, pest control, utilities that you pay and are not reimbursed by the tenant,
  • Bank charges and accounting fees related to the rental,
  • Wear-and-tear (depreciation) on furniture, appliances, curtains/blinds, and other movable assets used to earn rental (claimed under section 11(e) over SARS-accepted write-off periods).

Repairs vs improvements

  • Repairs keep the asset in working order (for example, fixing a burst pipe, repainting after tenant wear-and-tear, replacing broken tiles like-for-like). Repairs are generally deductible.
  • Improvements create something new or better (for example, adding a new room, installing a second bathroom where there was none, upgrading a kitchen beyond like-for-like). Improvements are capital and not deductible as a current expense; they may form part of the cost base for capital gains tax when you sell.

Wear-and-tear (section 11(e))

For furnished lets, you may claim wear-and-tear on movable assets used to earn income — for example, fridges, stoves, microwaves, washing machines, beds, couches, tables, TVs, routers. SARS publishes acceptable write-off periods (for instance, many appliances are five or six years; computers three years). Keep an asset register (description, purchase date, cost, method, rate, private-use apportionment, and claim to date).

Special building allowance: section 13sex (residential unit allowance)

Ordinarily, you cannot depreciate the building itself for residential letting. However, section 13sex allows a 5% per-year allowance (10% for qualifying low-cost units) on the cost of new and unused residential units or new and unused improvements used solely for rental trade, provided you own at least five such units in South Africa. The rules are technical (for example, how “cost” is measured if you buy a sectional title unit — deemed 55% of acquisition price for the unit itself) and should be approached with professional advice and careful records.

Vacant periods and partial letting

If a property is vacant for a time while you are actively seeking a tenant, SARS generally allows the ongoing expenses (levies, rates, interest, insurance) during the vacancy. If you only let part of the property (for example, one room), apportion the expenses on a fair and reasonable basis (a common method is floor area and time).

5) What is not deductible?

  • Capital improvements (as discussed),
  • The capital portion of your bond instalment (only interest is deductible),
  • Private or domestic expenses (for example, your own home’s electricity if not part of the rental),
  • Fines and penalties,
  • Initial furnishing of a primary residence if it is not used to earn income,
  • Travel to and from the property if it is merely to check on your private investment (some travel may be deductible where property letting is conducted as a bona fide trade; keep detailed logs and be conservative).

6) How your tax is calculated (and why your marginal rate matters)

Rental profit is added to your other taxable income (for example, salary) and taxed at individual rates applicable for the relevant tax year. For the 2026 tax year (1 March 2025 – 28 February 2026), SARS confirmed no changes to individual tax brackets, rebates, and thresholds compared with the prior year. Key items that affect landlords:

  • Primary rebate: R17,235.
  • Tax thresholds (no tax payable if your taxable income is below):
    Under 65: R95,750; 65–74: R148,217; 75+: R165,689.

Because rental profit stacks on top of your salary, it is usually taxed at your marginal rate (the rate on your last rand). That also means every deductible expense you claim saves tax at that marginal rate — a very practical way to think about record-keeping.

7) Provisional tax: will you need to pay during the year?

If you receive income other than remuneration (for example, rental) you may fall into the provisional taxpayer net. Natural persons who do not carry on a business are not provisional taxpayers if:

  1. their total taxable income will not exceed the tax threshold for the year; or
  2. the total of their interest, dividends, foreign dividends, rental from fixed property and remuneration from an unregistered employer will be R30,000 or less for the year.

If you are a provisional taxpayer, you generally make two compulsory IRP6 payments (end of August and end of February) based on estimated taxable income, with an optional third “top-up” within seven months after year-end (end of September for individuals with a February year-end). Estimation penalties and interest apply if your estimates are too low — be realistic and keep workings.

8) Joint ownership, spouses, and community of property

Where a rental property is co-owned, each owner declares his or her share of income and expenses in personal returns in proportion to ownership. For spouses married in community of property and jointly owning a property, rental may be split 50:50 unless another arrangement applies.

If you use a trust or company:

  • A company pays corporate income tax and may be a provisional taxpayer by definition.
  • A trust is almost always a provisional taxpayer and is taxed at flat trust rates (with certain exceptions for special trusts).
    Seek advice on anti-avoidance, distributions, and administration if you hold properties through entities.

9) When a rental makes a loss: ring-fencing rules (section 20A)

If your deductible rental expenses exceed rental income, you create an assessed loss. In principle, a trade loss can be set off against your other income (for example, salary). However, section 20A may ring-fence certain losses of natural persons from “suspect trades” (one of which is letting of residential accommodation), especially where:

  • You are in a higher income bracket, and
  • Specific triggers apply (for example, the trade has made losses in at least three out of five years, or the activity shows features of hobby-like or suspect trades).

An exception exists where at least 80% of the residential accommodation is let on a long-term basis during the year. The rules are technical; if you have recurring losses, get advice before assuming the loss will reduce your salary tax.

10) Capital gains tax (CGT) when you sell

When you sell a rental property (or it is otherwise disposed of), any capital gain is subject to CGT. For individuals and special trusts, the effective CGT rate is 18% (via a 40% inclusion at marginal rates). Useful points:

  • You may add capital improvements (but not routine repairs) and certain acquisition/disposal costs (for example, transfer duty, attorney transfer fees, agent commission) to the property’s base cost.
  • The annual exclusion of R40,000 applies to individuals each year (R300,000 in the year of death).
  • The primary residence exclusion of R2 million applies only to your primary residence, and generally does not apply to a property held exclusively for rental. If a home was your primary residence for a time and rented out for another period, apportionment applies.

11) Non-residents who earn South African rental

If you are not tax-resident in South Africa but you let South African property, the rental is South African-source income and is subject to normal tax here. You must usually register for tax, file an ITR12, and you may deduct qualifying expenses (rates, levies, interest, repairs, etc.). There is no general rent withholding tax in South Africa (different withholding rules apply on the sale of property by non-residents). Double Tax Agreements can affect where and how tax is paid — obtain advice if you are non-resident.

12) Practical worked examples

Example A: Long-term residential lease (no VAT), positive yield

Facts

  • Thandi (age 41) earns a salary of R720,000.
  • She lets an apartment on a one-year lease from 1 March to 28 February for R15,000 per month (R180,000 per year).
  • She pays: levies R3,000 p.m. (R36,000), rates R1,000 p.m. (R12,000), insurance R6,000, agent fees 8% of rent (R14,400), repairs R10,000, bond interest (only interest portion) R40,000, bank fees R1,200.
  • She furnished the flat with appliances and furniture costing R60,000. Based on SARS schedules, she claims wear-and-tear of, say, R10,000 for the year (illustrative).

Computation

  • Gross rent: R180,000
  • Deductible expenses: 36,000 + 12,000 + 6,000 + 14,400 + 10,000 + 40,000 + 1,200 + 10,000 = R129,600
  • Net rental profit: R50,400

Thandi adds R50,400 to her taxable income. The additional tax payable roughly equals her marginal rate applied to R50,400. If her marginal rate is, for example, 36%, the extra tax is approximately R18,144. Each extra rand of legitimate expense she claims saves her 36 cents of tax.

Example B: Loss and ring-fencing risk

Facts
Sipho earns R1,200,000 salary. His rental property was vacant for three months while he advertised and screened tenants. Gross rent collected over the year was R120,000. Deductible expenses (levies, rates, interest, insurance, agent fees, advertising, repairs) totalled R140,000 due to a major like-for-like repair.

Result
A rental loss of R20,000 arises. If this is Sipho’s third loss in five years on residential letting, section 20A may ring-fence the loss (unless at least 80% of accommodation was actually let on a long-term basis during the year), meaning the R20,000 is carried forward to offset future rental profits rather than reducing his current salary tax.

Example C: Short-stay operation (commercial accommodation) and VAT

Facts
Aisha runs a serviced short-stay apartment business with cleaning and linen. Her 12-month taxable turnover is R1.3 million.

Implications
Aisha is required to register for VAT. She must charge VAT on qualifying supplies and may claim input VAT on related expenses. For stays exceeding 28 days where an all-inclusive charge includes domestic goods and services, only 60% of the charge is subject to VAT (special value-of-supply rule). Residential tenancies under leases remain exempt — classification matters.

13) Common pitfalls to avoid

  • Claiming the full bond instalment instead of only the interest.
  • Capitalising repairs or, conversely, expensing improvements — get this right.
  • Forgetting to apportion expenses when letting only part of a home or for part of the year.
  • Ignoring provisional tax and then facing underestimation penalties and interest.
  • Misclassifying a serviced short-stay as an exempt residential lease (or vice versa), leading to VAT errors.
  • Not considering section 13sex when you own five or more new and unused rental units (or assuming you qualify when you do not).
  • Poor record-keeping, which weakens legitimate deduction claims during verification or audit.

14) Quick landlord checklist (print and keep)

  • Lease agreement and addenda saved (digital and hard copy).
  • All rent and deposit movements tracked in a ledger.
  • Levies, rates, insurance, and bond interest schedules on file.
  • Repairs vs improvements documented with before-and-after photos and invoices.
  • Asset register for furniture and appliances with wear-and-tear rates and claims.
  • Apportionments evidenced (floor-area and time calculations).
  • Vacancy marketing evidence kept (ad screenshots, agent mandate).
  • Provisional tax calendar noted (Aug / Feb / optional Sep top-up) with working papers.
  • Entity considerations reviewed annually (company/trust vs personal ownership).
  • CGT file updated with all capital improvements and transaction costs.
  • Records retained for five years after filing.

15) Frequently asked questions

Q: Do I pay tax if my rent just covers my bond?
You pay tax on profit, not on cash flow. If your deductible expenses (including interest and legitimate costs) exceed your gross rent, there is no rental profit. Be mindful of ring-fencing if you show losses repeatedly.

Q: Can I deduct my time and effort as an expense?
No. Your own time is not deductible. Only actual expenses incurred to produce rental income qualify.

Q: Must I register as a provisional taxpayer?
If your non-salary income (including rent) is R30,000 or less for the year and you do not carry on a business and your total taxable income is below your tax threshold, you are not a provisional taxpayer. Otherwise, you usually are.

Q: How does Airbnb change things?
If you supply accommodation with domestic goods and services (cleaning, linen, breakfast) regularly and systematically, you are likely supplying commercial accommodation. If your taxable turnover from that enterprise exceeds R1 million in 12 months, you must register for VAT and charge VAT on qualifying stays.

Q: I am a non-resident. Do I need to file?
Yes. South African-source rental is taxable here. You generally must register and file an ITR12. You may claim expenses. Check any double tax agreement with your country of residence.

Q: Can I depreciate the building?
Not for ordinary residential letting. Only movables qualify for wear-and-tear. The section 13sex allowance may apply if you own five or more new and unused residential units used solely for rental (with additional relief for low-cost units), subject to strict criteria.

Final word

Tax on rental income is straightforward once you classify the activity correctly, keep excellent records, and claim only what the law allows. The biggest wins for landlords are disciplined expense tracking, understanding repairs vs improvements, and staying on top of provisional tax. If you are in doubt about ring-fencing, VAT on short-stays, or section 13sex, speak to a tax practitioner and keep SARS-aligned documentation to back your position.

Sources

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