ARTICLE
30 April 2009

Rejuvenating Inner City Areas

MA
Moore Australia

Contributor

Moore Australia logo
Moore Australia part of a global network of offices, providing auditing and financial reporting services, advising local, national and international clients in the public and private sectors. Moore Australia generates annual revenues in the region of $80m. Moore Australia is part of the Moore Global network and has 14 offices with over 450 people nationwide. Moore Australia has extensive experience in state and local government, biotechnology, energy mining and renewables, health and aged care, education, manufacturing, not for profit, property and construction, retail and tourism and hospitality and has a strong presence in the following service lines: Asia Desk, Audit & Assurance, Business Advisory, Taxation, Corporate Finance, Governance and Risk Advisory.
During his 2008 Budget speech, the Minister of Finance, Trevor Manuel, announced that the Urban Renewal Tax Incentive that was introduced in 2004, will be extended for another five years until March 2014.
South Africa Real Estate and Construction

During his 2008 Budget speech, the Minister of Finance, Trevor Manuel, announced that the Urban Renewal Tax Incentive that was introduced in 2004, will be extended for another five years until March 2014. This news was celebrated by investors hoping to benefit out of South Africa hosting the 2010 FIFA World Cup.

The tax incentive takes the form of an accelerated depreciation allowance in 16 designated Urban Development Zones (UDZ). The intention of the incentive is to address inner city decay caused by urban migration, and to ensure that existing infrastructure in these areas is maintained and utilised to its full capacity. Central business districts and inner cities typically have well-developed transport infrastructure and population carrying capacity. The South African government's objective is therefore to promote private sector investment in residential and commercial property; both through construction of new buildings and improvement of existing ones. The buildings must be used solely for the purpose of trade, including rental of residential property. The allowance is structured as follows:

Construction of new buildings or extension of existing buildings:

  • 20 per cent allowance in the first year and 8 per cent per year for the next ten years.

Refurbishment of existing buildings:

  • 20 per cent straight-line allowance over five years.

There are certain deemed-cost provisions to which the allowance must be applied.

The City of Johannesburg alone has reported R5bn (approx USD $550m) of investments in its UDZ since the introduction of the incentive, with annual projections for the remainder of the term at even higher levels.

In order to promote this incentive among smaller investors, the incentive is not only available to developers, but also first-time buyers of the developed or improved building, including sectional title ownership. The incentive is also not ring-fenced to investment income relating to the building and excess losses can be carried forward indefinitely.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More