Browsing by Author "Zietsman, Magdel Elizabeth"

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    Assessing the normal tax implications of a home swap for a resident owning property in South Africa
    (Stellenbosch : Stellenbosch University, 2017-12) Zietsman, Magdel Elizabeth; Herron, Andrea; Stellenbosch University. Faculty of Economic and Management Sciences. School of Accountancy.
    ENGLISH SUMMARY : The concept of home swapping dates to the 1960s and is therefore an established practice. Participating members exchange reciprocal rights, entitling such members to accommodation (in each other’s homes) at predetermined dates for a specific period. The rapid and prodigious strides made in technological advancement have eliminated traditional barriers to international trade. Consequently, the practice of home swaps has been highlighted as a core contributor to the sharing economy. The conventional concept of home swapping has been revised to exploit the upsurge in the current innovative business environment. Exchanges can be facilitated via points, rights or cash. The essence of such an exchange can be reduced to a short-term rental agreement, with distinction only being made to the recompense: an incorporeal non-cash benefit (points/rights) or cash. Such rights/points fall within the ambit of barter trade, which in turn finds itself within the realm of gross income. However, the South African Revenue Service does not explicitly address the normal tax treatment of the incorporeal non-cash benefit (points or a right) collected. Therefore, the average South African taxpayer, lacking tax expertise, might inadvertently contravene the Income Tax Act No. 58 of 1962 (hereafter referred to as the “ITA”). Contributing to the convolution of assessing the normal tax repercussions for home swaps is the time at which the benefits accrue, the valuation of such benefits, and the influence of cross-border transactions. The principal aim of this study was therefore to address the normal tax implications for a South African resident, in possession of property within South Africa, upon receipt or accrual of the benefit of a successful home swap. The gross income definition of the ITA, in conjunction with relevant South African case law and legislation, was evaluated to elucidate the recommended normal tax treatment for home swap transactions (hereafter referred to as “swaps”). In addition, the terms and conditions of the two most prominent international home swap programmes, Love Home Swap and Home Exchange, were analysed in the context of the aforementioned legislation and case law. The study concludes with an examination of Australian tax legislation and case law as a source of counsel from the perspective of the Australian Tax Office. Home swap benefits, regardless of the currency, were found to be indistinct items of gross income for which no exemption exists in the current ITA. The time at which a normal tax burden arises is dependent on the swap type, the order in which participants consume their benefits and the terms and conditions inherent to affiliation with specific home swap programmes. Valuation of non-cash benefits is more multifaceted than appraisal where compensation is in cash. Valuation is primarily contingent upon the time at which normal tax is levied and whether the recompense is in cash or kind. An explanatory memorandum or augmentation of the ITA with additional sections, is therefore proposed. Such an addition to the ITA will instruct taxpayers and reduce the forfeiture of tax revenues due to inadvertent non-compliance.