By Sanette Viljoen
The facts: Janine owns a guest house. At times the guest house is overcrowded and Janine then asks her neighbour, Lettie, to make available her granny flat for guests to sleep over. The guest house pays the few nights’ accommodation costs directly into Lettie’s account. This is a lovely additional income for Lettie. Should Lettie declare this additional from-time-to-time income to the receiver of revenue and pay tax on it?
Everybody is obliged to declare all income earned for tax purposes. This includes rental revenue and is clearly spelled out in the Act.
This also applies to people who own holiday homes and rent them out from time to time. It is clear that the income Lettie receives will definitely be regarded as rental income as in the case of a guest house that earns income in terms of the relevant legislation. Even if a person rents part of your house it will be included in the definition of a lease. A room that is rented out is also included in this definition of a lease.
Lettie will have to declare the total rental for the year in her tax return once a year and will be taxed on it.
Taxable rental can be decreased by the amount of all expenses incurred during the lease in order to generate the rental, for instance the purchase of a bed to lease the room. However, a distinction should be made between maintenance expenditure and capital improvements. Capital improvements, for instance additions, cannot be subtracted as expenditure.