Transfer costs and transfer duty: the same as a Formula 1 racing team?

When purchasing a property, uncertainty and confusion frequently arises when it comes to the concept of transfer costs and transfer duty. Purchasers often assume that the aforementioned concepts are the same thing, however it differs vastly.

Transfer costs and transfer duty can be compared to a Formula 1 race team. Same team, same brand, same mission but different drivers achieving the mission. In the conveyancing instance, for the mission to be successful (the registration of the property) transfer costs and transfer duty have to be paid before registration. The transfer costs are paid to the transferring attorney (driver 1) whereas the transfer duty is paid to SARS (driver 2).

To above concepts will be discussed in more detail below to eliminate any further confusion that may arise.

Transfer costs:

Transfer costs are tariffs set by the Legal Practice Council (“LPC”) and which are based upon a ‘sliding scale’ in accordance with the purchase price. Not only will the purchaser be responsible for payment of the transfer costs but also the transferring attorney’s disbursements, namely postage and petties, electronic documents generating fees, lodging agents' fees, deeds office registration fees and rates clearance costs.

However, if the property is a sectional title, there will be additional expenses incurred, such as those expended in respect of ordinary levy clearance as well as homeowner's association levies (should there be a homeowner's association). These disbursement charges differ amongst firms, depending on their practices and procedures. Generally, attorneys will provide the purchaser with a breakdown of their expenses at the commencement of a transfer by way of a pro forma account.

The following table illustrates the current transfer cost sliding scale as set by the LPC and paid by the purchaser. The amounts below are only recommended guidelines and not set in stone.

Value of the property       Recommended Guideline

 1- 1 00 000                       R 5 400.00

 100 001 -500 000             R5 400 plus R860 per 50 000 or part thereof above that

 500 001 - 1 000 000         R12 280 for the first R500 000 plus R1 660 per R100 000 or part thereof above that

1 000 001 – 5 000 000        R20 580 for the first R1 000 000 plus R1 660 per R200 000 or part thereof above that

 Over 5 000 000                    R53 780 for the first R5 000 000 plus R4 200 per R1 000 000  or part thereof above that

Transfer duty:

SARS levies transfer duty on all property purchases. Known as "transfer duty," this tax is paid to SARS during the transfer process. The current transfer duty exemption threshold is R1 000 000.00, and which applies to all property purchases, regardless of the type of property being purchased. This means that properties with a purchase price or value of less than R1 000 000.00 will not be subject to SARS transfer duty. Take cognisance of the fact that although payment of the transfer duty is not applicable when falling below the said threshold bracket, a transfer duty receipt is still required in order to form part of the documentation that will be lodged in the Deeds office for the registration of the transfer.

The purchase price of the property or its value, whichever is greater, is used to calculate transfer duty. The current transfer duty rates, which apply to all persons including firms, close corporations, and trusts, are shown in the table below.                                                  

Value of the property (R)          Rate

1-1 000 000                                 0%

1 000 001 – 1 375 000                3% of the value above R1 000 000

1 375 001 – 1 925 000                R11 250 + 6% of the value above R 1 375 000

1 925 001 – 2 475 000                R44 250 + 8% of the value above R 1 925 000

2 475 001 – 11 000 000              R88 250 +11% of the value above R2 475 000

11 000 001 and above               R1 026 000 + 13% of the value exceeding R11 000 000

When transfer duty is payable on a transaction, it must be paid to SARS within six months from the date of sale, failing which the purchaser shall be subject to a penalty/interest charged on the unpaid transfer duty.

Further transactions which are excluded from payment of transfer duty under the Transfer Duty Act No. 40 of 1949, include the acquisition of property by inheritance or a transaction subject to value added tax (VAT).

Thus, when a purchaser makes an offer on a property, he or she must take into account the transfer costs and transfer duty that will be incurred in addition to the purchase price and take cognisance of the fact that these two costs remain separate, as explained above. Should one forget, one can always refer back to the F1 analogy.

For more information from our conveyancing department, kindly email us on info@hjw.co.za.

Written by Cathleen van der Walt

This article is provided for informational purposes only and should not be substituted for legal advice on any specific matter. Any opinions expressed herein are subject to the law as at the time of writing and will change in accordance with any change in the law. We recommend that you contact HJW ATTORNEYS at info@hjw.co.za directly for advice applicable to your specific matter.