On June 30, 2021, South Africans can wave the Section 12J tax incentive goodbye.
That might not mean a whole bunch to you, but there’s a reason so many shrewd investors are very sad to see the tax break bowing out.
Once interested, the entire sign-up process can be done in 24 hours, so it’s really not too late to get involved before the window of opportunity is shut for good.
Described by specialist Section 12J firm Anuva Investment’s Neill Hobbs as “hands down the best tax-saving opportunity imaginable”, the Section 12J incentive was introduced by SARS and Treasury in 2009, as a means to boost investment into small-to-medium-sized enterprises and, in doing so, stimulate the economy and improve job creation.
Initially, it received little attention, and was seen as something for the wealthy, and out of reach for your average investor.
However, as experts began to realise the nature and merits of the opportunity, so too did smart portfolio and investment managers and, over the last eight years, the Section 12J sector has developed some attractive investment products.
With the clock now ticking, and slightly less than two weeks to go, many Section 12J funds are pulling out all the stops to attract investors, and the scurry for last-minute offerings might result in an “anything goes” scenario, as fund managers hustle for attractive options.
Ryan Flowers, Fund Manager at Cape Town-based Flyt Property Investment, warns that investors should tread carefully as they shop for 12J investments, and make sure they are confident in the fund manager and happy with their underlying investment.
The firm has sold out of their initial Section 12J hospitality property investment options leading up to the 2021 tax season deadline, and has since received considerable interest in their ancillary tranche of property ownership via 12J at Cape Town’s One Thibault and The Upper East Side hotel apartments in the Woodstock area (below).
Flowers explains that the popularity of their offering was due largely to the finance facility offered through their R240 million and R190 million-strong Flyt Select and Partnership Funds, which provide investors with the funds to invest upfront (before the June 30 deadline) while they waited for their tax refund:
“The problem with any Section 12J investment is that you need the cash upfront to invest in order to receive the tax certificate and then the tax refund.
“The Flyt Select and Partnership Funds are aimed at making sure investors don’t miss out on the final Section 12J tax rebate, with a simple 5% deposit (Flyt provides bridging finance for the balance) while they wait for their tax refund to come back, which is then invested into their chosen unit or project, settling part of the bridging finance. The balance of the bridging finance is then settled either by a homeloan or cash (Flyt Select) or a long-term loan from Flyt (Partnership).”
According to the firm the Partnership Fund has, to date, saved investors R60 million in tax which has been used to acquire hospitality properties.
Subscriptions to the 2022 Partnership fund will be capped at R300 million, and investors can contribute via their R2,5 million allowance for individuals or R5 million company allowance.
To find out more regarding Flyt Property Investment’s developments and funding, head here.
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