Understanding Article 13: Tax Savings for South African Property Investors
When you start building your property investment portfolio, discovering ways to maximise your after‑tax cash flow is a real game‑changer. One benefit many miss is Section 13sex of the Income Tax Act - also known as Article 13. This powerful incentive lets you claim an annual deduction on qualifying new rental units - helping turn good returns into outstanding ones.
Wondering how Article 13 applies to your property investments? We're unpacking what it means, who it benefits, and how it might help you grow your portfolio more efficiently.
What Is Article 13 (Section 13sex)?
Section 13sex of the Income Tax Act is a tax incentive introduced by SARS in 2008 to encourage private investment in the residential rental market. It allows investors to deduct a portion of the construction or acquisition cost of new and unused residential rental units from their taxable income.
In simple terms, you can deduct 5% of the building cost (excluding land) per year over 20 years, which means the full cost of the building is eventually written off. For developments classified as low-cost housing, this deduction increases to 10% per year over 10 years, offering an even quicker return on your investment.
This allowance was created to promote the supply of rental housing - especially in areas where affordability and access are key concerns. But for investors, it’s more than just a government incentive. It’s a smart, long-term strategy to reduce your tax bill, improve cash flow, and build a financially sustainable property portfolio over time.
Who Qualifies for the Article 13 Tax Deduction?
If you’re serious about growing a rental portfolio, Article 13 could be one of the smartest tools in your belt. But it’s important to know upfront whether you tick all the boxes to benefit.
To qualify, you’ll need to own at least five new and unused residential units in South Africa. These can be anything from apartments to freestanding homes or sectional title units - what matters is that they’re self-contained and suitable for full-time residential living.
There’s one catch: these units must be 100% for rental use. In other words, they can’t be your holiday getaway or a unit you plan to live in part-time. They also need to have been acquired or built after 21 October 2008, and must be brand new when you take ownership - so no second-hand or previously owned properties.
One other important note: the tax deduction only applies to the building portion of the property’s cost, not the land it sits on. For apartments, SARS generally treats about 55% of the total price as the building value, which is what your deduction would be based on.
If you’re planning to scale up and hold onto your properties for the long term, this is definitely a strategy worth exploring.
How Does the Deduction Work?
The deduction is calculated as 5% of the cost of the qualifying building per year. For sectional title apartments or flats, the cost is typically assumed to be 55% of the purchase price, to account for land value.
Example Calculation:
Purchase Price: R1,000,000
Building Cost (55%): R550,000
Annual Deduction: 5% of R550,000 = R27,500
Total Deduction Over 20 Years: R550,000
This deduction is applied annually to reduce your taxable income, which can improve your overall cash flow and lower your effective tax rate. For low-cost housing (generally defined as units under R450,000 or with rent under 1% of market value), the deduction doubles to 10% per year for 10 years.
What Makes Article 13 So Powerful?
1. It Improves Cash Flow
By reducing your taxable income, Section 13sex lowers the amount of tax you need to pay each year. This improves your cash flow and makes it easier to reinvest into new properties or reduce outstanding debt.
2. It Encourages Long-Term Investment
The allowance is structured over 20 years, making it especially attractive for investors who plan to hold their properties over the long term. It effectively reduces the real cost of acquiring the building.
3. It Works With Other Deductions
Article 13 does not replace other deductions. Investors can still claim expenses such as bond interest, rates and taxes, levies, insurance, and maintenance costs—making this a supplementary tax-saving mechanism.
4. No Recoupment on Sale
One of the most attractive features of Article 13 is that there is no recoupment of the deduction when the property is sold. This makes it a long-term tax shield with no hidden clawbacks.
Common Questions About Article 13
Do I have to purchase all five properties at once?
No. You can build up your portfolio over time. The tax deduction only becomes effective once you own five or more qualifying units.
Can I claim the deduction through a trust or company?
Yes. Properties owned by individuals, companies, or trusts all qualify, as long as the ownership and rental use criteria are met.
Do off-plan or developer units qualify?
Yes, provided the unit is new and unused when transferred to you and used exclusively for rental purposes.
Does the deduction continue if the unit becomes vacant?
Yes, temporary vacancies do not affect the deduction as long as the intention is to continue renting out the unit.
Strategic Considerations for Investors
Article 13 encourages the development of sustainable, long-term rental portfolios. It is particularly well suited to investors who:
Want to scale quickly by acquiring multiple units
Are building retirement income through property
Wish to offset tax while increasing net yield
Are investing in areas with high rental demand and affordable pricing
If your goal is to build generational wealth through property investment, leveraging this allowance across five or more units can make a significant impact on your portfolio’s performance.
Summary of Benefits
5% annual tax deduction on building cost
10% annual deduction for qualifying low-cost housing
Works with other tax deductions
Applies to both freehold and sectional title units
No recoupment on resale
Enhances long-term returns and cash flow
Final Thoughts
In South Africa’s evolving property market, every advantage counts. The Article 13 allowance is one of the most investor-friendly tax benefits available - especially for those aiming to build wealth through residential rentals. If you’re planning to expand your portfolio, understanding and using this deduction can help you reduce your tax burden, improve your ROI, and scale your investments more sustainably.
To take full advantage of Article 13, work with a tax practitioner or property advisor who understands the legislative requirements and can help you structure your portfolio correctly from the start.