Section 13sex Tax Allowance South Africa — How Investors Cut Tax Legally (2025)

Section 13sex of the South African Income Tax Act allows investors who own 5 or more new residential units to deduct 55% of the building cost over 20 years (2.75% per year) — a hugely powerful tax break for active SA property investors.

Who qualifies — the 5-unit rule explained

You qualify if:

1. You own 5 or more residential units (apartments, sectional title, freestanding houses)
2. The units are in the Republic of South Africa
3. They are new and unused when first acquired
4. You rent them out as residential dwellings
5. You're a taxpayer (individual, company, trust)

How much can you deduct?

The 55% adjustment: Treasury treats 55% of the purchase price as the "qualifying building cost", so effectively you get 5% × 55% = 2.75%/yr of the total purchase price as deduction.

Worked example: R8M portfolio of 5 new flats → R220,000/year SARS deduction × 20 years = R4.4M total tax shield.

Step-by-step: how to claim on your IT12

1. Maintain detailed records: purchase agreements, invoices, occupation certificates
2. Confirm "new and unused" status via developer letter
3. In your annual IT12, populate the "Section 13sex Allowance" field
4. Attach supporting schedule with each unit, cost, and prorated deduction

Common pitfalls SARS audits punish hard

• Claiming on a unit not yet brought into use (must be tenanted)
• Mixing residential and commercial under same allowance
• Recoupment surprises on sale (you owe back the deduction)
• Missing the "new and unused" threshold (off-plan resale doesn't qualify)

Section 13sex vs Section 13quat — which fits your build?

• 13sex: residential, 5+ units, 5%/yr or 10%/yr low-cost
• 13quat: urban development zones (selected cities), 20%/yr Y1 + 8%/yr for next 10 yrs

Stack them if the property qualifies for both!

Worked example: R8m portfolio, R2.2M deduction over 20 years

5 × R1.6M new apartments in Sandton:

• Qualifying base: R8M × 55% = R4.4M
• Annual deduction: R4.4M × 5% = R220,000
• Over 20 years: R4.4M total deduction
• At 45% marginal tax rate: R1.98M tax saved

Recoupment on sale — the trap

When you sell, SARS recoups previously-deducted allowances back into your taxable income. Plan for this — sell into a CGT-friendly structure (trust, company).

Section 13sex + sectional title + REIT vs direct

The deduction works for direct ownership AND for company / trust structures. REITs (listed) don't pass through the deduction — direct ownership wins for active investors.