In finance minister, Trevor Manuel’s budget speech in 2008 it was announced that the annual threshold for VAT will be increased from R300 000 to R1 million.

According to Martin Bester, Managing Director of Intersect Sectional Title Services, a subsidiary of Spire Property Group, this is potentially good news for residential home owners associations whose levy income is below the new threshold as they may now opt to deregister for VAT as some were registered due to confusion in the past on this topic.

“Levy income at home owners’ associations is subject to VAT at the standard rate in terms of section 7(1)(a) of the VAT tax Act, No. 89 of 1991, therefore, historically, all schemes with an income of over R300k per annum were obliged to register. But in residential schemes there is little, if any, material benefit to being VAT registered and deregistering will reduce the admin burden on the scheme.”
“Furthermore,” says Bester, “schemes can also save money as most managing agents charge additional fees for completing the VAT returns and the audit should be less complicated and costly too.”

Of course not all home or property owners associations will opt to deregister and Bester advises that an accountant would be the best person to direct the trustees and/or Directors in this regard as the net input and output VAT of the scheme should also be considered.

“Intersect constantly strives to reduce the administrative costs of the associations that they administer.”

In this light, Bruce Kerswill, the managing director of Spire Property Group and Bester, concur that, from an administrator’s point of view, they believe that deregistration should be seriously considered.