A New Way to Invest in Plett Property & Save Big on Tax
A New Way to Invest in Plett Property & Save Big on Tax
SARS has allowed the formation of specific tax-compliant and authorised venture capital companies (section 12J under paragraph 11 of the Fourth Schedule to the Income Tax Act) that taxpayers as individuals, trusts or companies may invest in and by so doing, gain a 100% deduction against income in the year of investment. For example, if you earn R10million this year and you also invest R10million into a 12J company this year (by subscribing for shares in the 12J – it is an equity investment, not debt) then you pay no tax on the R10m that you earned initially. Effectively SARS is contributing 45% of your investment as long as the 12J company invests the funds into a venture or small business.
I do not know of any other investment opportunity that automatically enhances the return by 45% and as such, this should not be ignored by anyone/any company with high income and therefore high income or capital gains tax in any particular year. On top of this, there will be the returns generated through the operation of the enterprise.
Right here in Plettenberg Bay, there is an opportunity to invest in this manner in an apartment in Plett Quarter, a brand new secure and exclusive penthouse and luxury apartment development in the heart of Plett on Main Street, with views of the ocean and lagoon estuary from its upper levels. The development has a lifestyle commercial component with a signature restaurant and coffee bar on the ground floor. It will create urban renewal and be a landmark in one of the most prominent locations in Plett. Prices range from R2,300,000 to R8,650,000 including VAT, but investors in the 12J will be able to invest more or less depending on their requirements.
This prestigious, stylish and contemporary development consists of 12 luxurious penthouses with ocean views and entertainment terraces, and 27 luxury apartments located close to an extraordinary spread of facilities, many of which are within easy walking distance. The lifestyle is that of Indian Ocean sea-board living, enriched with the benefits of outdoor space, sunlight and views. This easy lifestyle character is exemplified by the terraces flowing seamlessly from the open-plan living and dining rooms and main bedroom suite interiors. Equipped with modern, sustainable and state-of-the-art amenities and services, setting a new standard among the premier properties of the Southern Cape. The interior design solutions offer a carefully co-ordinated palette of materials, finishes, and accessories reflective of a beach lifestyle with driftwood and sand accents in the finishes and textures selected. The living area floors will be finished in matt textured tiles, complemented by light walls and ceilings, and further enhanced by the introduction of focal wall claddings and finishes.
The commercial component, which has just come onto the market, consists of 11 shops/offices and a restaurant. These will not form part of the 12J enterprise and are currently for sale at R22,000/m² excluding VAT.
There are about 120 registered 12J companies but the one that Plett Quarter is involved with, Contango Venture Capital Company held by Palladium Group, is unique in that they have spent a fortune with lawyers structuring the vehicle such that it has the ability to issue multiple share classes as long as each share class has a minimum of 5 investors. Most other 12Js issue shares out of a single class and therefore all investors have the “diversified returns” generated by an array of investments with no ability to direct the investment strategy, which is obviously what is required to invest in a specific project like Plett Quarter.
When you invest, shares from the same single share class will be issued and the funds generated from that subscription will be ring-fenced and used to acquire asset(s) whose beneficial interest will be solely for the shareholders in that share class. For example, you will invest into Contango VCC – Share Class D and will be the sole shareholder(s) in that class, and then Contango VCC – Share Class D will acquire units in Plett Quarter to that value. The returns generated from the investments made by that share class will be entirely for the class D shareholders and will be distributed equally (pro-rata) to all the investors.
The Plett Quarter apartments in the 12J will be operated as a boutique hotel by a well-know hotel group.
The investment needs to remain in the 12J for 5 years after which time the VCC may sell / exit / restructure the investment in the underlying investment opportunities and return proceeds to the investors. This full return will be taxed at prevailing CGT rates.
This investment really is a no-brainer for any person or entity with high income or capital gain tax. Contact me for more information.
By Hein Pretorius, owner-broker at Lew Geffen Sotheby’s International Realty Plettenberg Bay: hein.sir@plettenbergbay.com or 083 701 3159.
Click below for more details on an example of a Plett Quarter property:
Plett Quarter Penthouse Apartment
Simply the best of the best.
Asking price: R8,577,061 (including VAT; no transfer duty)