Eish, Stuck in Your Own Name? Move Property Into a Company
"Can I move a property I already own into a company?" It's one of the most common questions I get.
Yup, you can move a property you already own into a company. There are two main routes. An ordinary sale to the company triggers the full set of costs. A section 42 asset-for-share transaction swaps the property for shares, so tax is deferred, not cancelled. Either way, the bank holding your bond has to agree.
You own one, two, maybe three properties in your own name. You've started hitting the affordability ceiling. And you've been quietly wondering if you made an expensive mistake you can't undo.
You didn't do it wrong. You did it in the wrong order and in the wrong container. Those are different problems, and the second one can often be fixed. I did the same thing for years: every property in my own name, one deal at a time, waiting for my affordability to free up before I could go again.
Should you move properties in your own name to a company?
Sometimes. Not always.
It makes sense to look at it when the ceiling is stopping you from buying again, when you want the risk on a rental separated from your home, or when you're building something bigger than two or three properties.
It often doesn't make sense for the home you live in, for a single property you'll never add to, or where the cost of moving is bigger than the benefit. Run the numbers with a practitioner before you move anything.
Okay, so what are the two routes?
Route one: sell it to the company. An ordinary sale at market value. That triggers the full set. Capital gains tax on the gain in your hands. Transfer duty for the company as buyer. Conveyancing fees. And a brand-new bond in the company's name.
Route two: swap it for shares. Instead of selling the property for cash, you transfer it to the company in exchange for shares in that company. The Income Tax Act deals with this in section 42, and it's called an asset-for-share transaction.
Here's what section 42 does, in plain terms. When a transaction genuinely qualifies:
The tax on the gain is deferred, not cancelled. The company takes over your base cost, and the tax is dealt with when the company eventually sells.
The transfer duty can fall away, because the Transfer Duty Act carries an exemption for qualifying transactions of this kind.
Notice the words "genuinely qualifies". Section 42 has conditions. They have to be met, and a practitioner has to confirm that they are, before anybody signs.
Want the exact setup I use? The Directors Fortress walks you through registering the company and buying in it. R99 once off. Start here
So why doesn't everybody do it?
Because of the part almost nobody tells you.
It's not the tax that stops most people. It's the bank.
Your bond is in your name. It doesn't quietly become the company's bond when the property moves. The bank has to consent to the transfer, and in most cases the existing bond is cancelled and a new one is registered in the company's name, with you signing surety. That means a new application, a new assessment, and bond registration costs.
If the bank says no, the tax route doesn't matter. So start with the bank conversation, not the tax one. And take a good originator with you. Mine takes my calls, and on a conversation like this one, that matters.
What does it cost to move a property into a company?
It depends on the route, the property and the bond, so I won't give you a number. These are the lines to get quoted before you decide:
Conveyancing fees for the transfer
Bond cancellation and new bond registration costs
Transfer duty, if the transaction doesn't qualify for the exemption
Your tax practitioner's fee for structuring the transaction properly
Any tax triggered if you use the ordinary sale route
Get all five in writing. Then compare the total against what staying where you are is costing you. Sometimes the honest answer is: leave it, and buy the next one in a company.
What I'd watch for
Deferred is not cancelled. The gain is still there. It moves into the company with the property.
Section 42 has conditions. Miss one and the relief can fall away. This is practitioner territory.
Bank consent is not automatic. The bank reassesses the deal with the company as borrower.
There are rules about what happens afterwards, including if the shares or the property are sold soon after the transaction. Ask about them.
It's cheaper to start right. A property bought in the company from day one never needs any of this.
Where the company fits
If you already own in your own name, the company is where you're heading. If you don't own yet, the company is where you start, so you never pay to move.
Either way, the first step is the same. Get the company registered and set up properly. The Directors Fortress covers exactly that. The move itself is a conversation for your practitioner and your bank, with the facts of your own bond in front of them.
FAQ
Can I transfer my house into my company without paying transfer duty?
Possibly. A transaction that genuinely meets the section 42 requirements can qualify for a transfer duty exemption. A practitioner must confirm it for your situation.
Does section 42 mean I pay no capital gains tax?
No. The tax is deferred. The company takes over your base cost, and the gain is taxed when the company eventually disposes of the property.
Will the bank let me move my bonded property into a company?
Only with its consent. Usually the existing bond is cancelled and a new bond is registered in the company's name, with you as surety.
Is it worth moving one property into a company?
It depends on the costs and your plans. If you'll never buy again, often not. If the ceiling is blocking your next purchase, it may be.
Can I move my primary residence into a company?
You can, but the home you live in has its own tax rules and is usually a separate decision. Get advice before you do.
Related reading
Ready to set it up properly?
The Directors Fortress gives you the investor-friendly offer to purchase, the blueprint for registering the entity, and a walkthrough of the structure I use. R99 once off, yours to keep.
Already own property in your own name and want to move it? Book a one-on-one with Michael: zahomes.co.za/strategy-call
Education only. This article is general information, not tax, legal or financial advice. Speak to a registered tax practitioner, attorney or financial adviser about your own situation.
Sources
Income Tax Act 58 of 1962, section 42 (asset-for-share transactions) · SARS, Transfer Duty: sars.gov.za · SARS, Capital Gains Tax: sars.gov.za
About the author
Michael Bowen co-founded ZAHomes. He bought his first property in 2003 on the outskirts of Amsterdam, with a 100% mortgage, at the wrong point in the cycle, and lost over €14,000 on it while sanding the floors himself in a heatwave. Twenty-odd years, 40-odd countries and a lot of property school fees later, he lives in Cape Town and teaches South Africans to buy and hold property inside a company. His view hasn't changed: an investor's greatest assets are the lessons from their failed deals.
