By Clint Riddin

Clint RiddinAs explained in a previous article, the term community schemes includes a body corporate, home owners association, shareblock scheme, retirement scheme and any form of scheme which is deemed to be similar in nature. In the next three issues of Paddocks Press, we will unpack the newly implemented SARS Interpretation Note 64, which deals with how a community scheme is taxed by SARS.
The taxation of these schemes is generally misunderstood by members and trustees alike. There is a common misinterpretation that because levies are exempt from tax in terms of section 10(1)(e)(i) and 10(1)(e)(ii) of the Income Tax Act, that the scheme does not have to pay tax or even register as a taxpayer. These sections of the Income Tax Act are the first requirement of tax compliance which give rise for the need for a scheme to register as a taxpayer and then allows SARS to monitor taxable and non-taxable transactions. New developments in tax compliance even require individuals who are below the tax threshold to register as taxpayers.A body corporate automatically receives exempt income status in terms of these sections, but a home owners’ association needs to apply for exemption and the Constitution or the Memorandum of Incorporation if the HOA is a Non Profit Company, needs to accompany the application showing that distributions of surpluses and accumulated reserves are not paid back to members. It is very important to note that the exemption from tax only applies to levy income. Enter then the old SARS practice note 8 and the new Interpretation Note 64, which is now applicable.

These documents then set out what is taxable income and how the income should be taxed. Over the next two issues, we will set out the formula for taxing other income and how SARS will administer the returns for this taxable income in terms of the new Interpretation Note 64.

In closing, we refer back to previous comments; whilst people generally do not like paying tax, it is not wise for trustees to treat the taxation of a scheme as they might their own tax affairs. Trustees and office bearers have a fiduciary responsibility to a scheme and any liability arising out of non-registration, or tax avoidance, could negate the indemnity afforded by the sectional titles act, or any constitution in terms of a home owners’ association, and be recovered by members from the trustees in their personal capacities.

For further reading visit the SARS website, Click on ‘whats new’ on the left hand side menu.

Article reference: Paddocks Press: Volume 7, Issue 4, Page 2


Clint Riddin of Clint Riddin & Associates is a sectional title accountant specialised in accounting, income tax and secretarial services to bodies corporate.Related articles:
Taxation of community schemes by SARS – Part 2


  • Renschie
    23/09/2019 15:43

    Good day.

    Some of the Trustees want to know why must they provide their ID’s if a Public Officer is appointed by the Managing Agent.

    • Paddocks
      04/10/2019 09:39

      Hi Renshcie,

      Thank you for your comment.

      We would love to help, however we do not give free advice.We do offer private consulting. You’re welcome to send us an email at and we can provide you with a no-obligation quote.

      Kind regards,