I would like clarification on whether the additional properties (Zinkwaze and Boschenvaal) would qualify as Primary residence as they are not used in any form of trade, so no income can be derived from the usage of the homes as holiday homes by our client
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
We accepted that all the properties were owned by the trust, but that is really only relevant to the primary residence.
According to the definition, in paragraph 44 of the Eighth Schedule to the Income Tax Act, 'an interest' excludes … (ii) a right or interest of whatever nature in a trust or an asset of a trust, other than a right of a lessee who is not a connected person in relation to that trust.
The primary residence exclusion will therefore not be available in respect
With regard to the definition of ‘primary residence’ the following two requirements are important:
“…that person or a beneficiary of that special trust or a spouse of that person or beneficiary…” must have:
(i) ordinarily resides or resided in as his or her main residence; and
(ii) uses or used mainly for domestic purposes”.
Even where the other properties were not held by the trust, they would not qualify as a primary residence.