By Clint Riddin

Clint RiddinCommunity schemes as a term includes bodies corporate, home owners’ associations, shareblock companies and the like. While SARS does not use this terminology itself, given the changes to legislation affecting these forms of entities, it is the most fitting way to include all these in reference to how SARS taxes these entities.


There is some confusion on which tax approach or compliance is needed but, in our view, the current practice note 8 is still the basis on which community schemes are taxed, which is as follows:

All income other than levies earned by the particular community scheme, such as interest, including interest and penalties on late payments, as well as rentals, such as rentals from cellphone and advertising companies, is taxable. Some community schemes have clubhouse and restaurant facilities, and income earned from these is also taxable. A 2008 amendment to the Income Tax Act has now made the first R50,000 earned from sources other than levies exempt.

It is important to note that a community scheme is liable to register as a taxpayer as soon as the legal entity comes into existence. Where a scheme has not yet registered, SARS has been shown to be understanding, and in certain cases has waived penalties, provided that the taxpayer “comes clean”; the scheme is then taxed from date of establishment.

Community schemes may also take advantage of the voluntary disclosure period that SARS has in place currently, but this closes at the end of November.

Part of the confusion has come about with a recent amendment to the definition of “provisional taxpayer”, which now allows a community scheme taxpayer to submit a provisional tax return only where provisional tax is payable; so, where tax is calculated to be nil, no provisional tax return needs to be submitted. However, if tax is calculated to be payable, even after the R50,000 exempt income allowance, then a provisional tax return and payment must still be submitted by the due date.

The amendment has not removed the need for annual tax returns known as IT14s to be submitted, even where these are nil. So tax compliance is still necessary, albeit with relief to an extent for a number of schemes from some of the administrative burden.

SARS has also issued a draft interpretation note that will, when implemented, replace practice note 8, removing the need to submit provisional tax returns completely, irrespective of whether provisional tax is payable or not; annual tax returns will still need to be submitted and the taxpayer will pay tax on assessment. It is important to note, however, that this is a draft interpretation note that is not yet in force. Again, this does not remove the need for a community scheme to register as a taxpayer.

Article reference: Paddocks Press: Volume 6, Issue 9, Page 2

Clint Riddin of Clint Riddin & Associates is a sectional title accountant specialised in accounting, income tax and secretarial services to bodies corporate.