Buyer Guide
Transfer Duty Explained: New Developments in South Africa
Transfer duty is the single largest avoidable line-item on a South African property purchase. Most Gauteng new developments price entry-level units specifically to dodge it. This is how the SARS rules work, what the buyer pays, and why the new-development buyer often pays zero.
Authored alongside Dewald Kleyn, Founding Member and Gauteng Manager.
What transfer duty is
Transfer duty is a tax levied by SARS on the acquisition of immovable property. The buyer pays it. The seller does not. It is calculated on a sliding scale linked to the purchase price: below the annual threshold, transfer duty is zero; above the threshold, the rate increases in steps with the price.
Transfer duty is not optional and is not negotiable. The conveyancer lodges the calculation with SARS, the buyer pays it into the conveyancer trust account, and SARS issues a transfer duty receipt that must accompany the transfer file at the deeds office. No transfer registers without the receipt.
The threshold and the sliding scale
The threshold below which no transfer duty is payable is reviewed annually in the budget speech. Practically, this means a target band: below the threshold, zero duty; immediately above the threshold, the rate starts low and steps up as the purchase price rises. The exact rates apply to the bracket you fall in, not the entire purchase price; the calculation works in tax-bracket style, like income tax.
Always confirm the current threshold and sliding scale on the SARS website before signing any sale agreement. Africa Estate runs the calculation on every new-development quote so the buyer sees the all-in cost, not just the headline price.
Why new developments price under the threshold
Developers know the SARS threshold cold. Entry-level units in new developments are routinely priced to land at or just under the threshold so that the buyer pays zero transfer duty. This is not a coincidence; it is a marketing decision. The result is that a R975,000 new development unit and a R1.05 million resale unit can look like the same price at first glance, but the new-development buyer pays zero transfer duty while the resale buyer pays several thousand rand. The all-in cost difference is significant.
First-time buyers and entry-level investors benefit most from this dynamic. The transfer-duty saving on a single unit easily covers a large share of the conveyancer fees, bond initiation costs, and the first year of municipal rates.
Transfer duty versus VAT on new developments
Most new residential developments by VAT-registered developers price units inclusive of VAT, not transfer duty. The reason: SARS does not charge both VAT and transfer duty on the same transaction. If the developer is VAT-registered and the sale is in the course of their VAT-registered business, the transaction is VAT-bearing and transfer-duty exempt.
For the buyer, the practical effect is the same: a single all-in price quoted by the developer. The conveyancer confirms whether transfer duty or VAT applies and prepares the transfer file accordingly. The sale agreement specifies the VAT or transfer-duty position upfront. Always read this clause before signing.
When and how the buyer pays
- Sale agreement signed and bond granted.
- Conveyancer prepares the transfer file and calculates transfer duty (or confirms VAT applicability).
- Conveyancer issues a cost statement to the buyer with transfer duty, conveyancer fees, and disbursements itemised.
- Buyer pays the full cost statement into the conveyancer trust account.
- Conveyancer lodges the SARS transfer duty payment and receives the receipt.
- Transfer file is lodged at the deeds office with the receipt attached.
- Transfer registers, ownership passes, and the bond is simultaneously registered.
Get the all-in cost on a specific unit
Dewald Kleyn runs the all-in cost calculation (purchase price plus transfer duty or VAT plus conveyancer fees plus bond costs) on every Gauteng new development before any signature. No charge.
Frequently asked questions
What is transfer duty in South Africa?
Transfer duty is a SARS tax on the acquisition of immovable property in South Africa. The buyer pays it; the seller does not. It is calculated on a sliding scale linked to the purchase price and is lodged through the conveyancer as part of the transfer process. No property can transfer at the deeds office until the transfer duty has been paid or a SARS exemption is in place.
What is the transfer duty threshold?
The threshold below which no transfer duty is payable is reviewed in the annual budget speech. The threshold applies to all residential property in South Africa. Below the threshold, transfer duty is zero; above the threshold, transfer duty is calculated on a sliding scale that increases with the purchase price. Confirm the current threshold with SARS or your conveyancer because it adjusts each tax year.
Why do new developments often pay zero transfer duty?
New developments in South Africa are routinely priced at the entry-level so that the unit purchase price falls under the SARS transfer duty threshold. This is a deliberate pricing strategy by developers. It is also why first-time buyers and entry-level investors gravitate to new developments: the all-in cost is meaningfully lower than equivalent resale stock priced above the threshold.
Who pays transfer duty: the buyer or the seller?
The buyer pays transfer duty. It is one of the once-off costs payable on registration, alongside conveyancer fees and bond costs. The seller pays separate costs (estate agent commission, electrical compliance, beetle and plumbing certificates where applicable) but does not pay transfer duty.
When is transfer duty paid?
Transfer duty is calculated and lodged by the conveyancer during the transfer process. The buyer pays it into the conveyancer trust account before the conveyancer can lodge transfer at the deeds office. Practically, the buyer settles all transfer costs (transfer duty, conveyancer fees, bond costs) in a single payment a few weeks before registration.
Are there any transfer duty exemptions?
The main exemption is the threshold itself: purchases below the threshold are exempt. There is also an exemption for purchases that are subject to VAT (typically commercial property or VAT-registered seller residential property), because VAT and transfer duty are not levied on the same transaction. Other narrow exemptions exist for divorce settlements, estates, and certain corporate restructures. SARS or your conveyancer can confirm applicability.
How much transfer duty would I pay on a R1 million resale property?
The exact amount depends on the current SARS sliding scale, which is updated annually. A R1 million resale property typically falls just above or just below the threshold depending on the year. The reason new-development buyers come out ahead is that a R1 million new build is often priced at R950,000 or R975,000 to land under the threshold, and the same buyer would pay several thousand rand of transfer duty on a resale unit at the higher price. Always run the calculator with the current SARS rates.
Does the developer pay transfer duty on the land?
The developer paid the transfer duty (or VAT, depending on the structure) when they acquired the land. That cost is built into the development pricing. The buyer of a unit in the development pays transfer duty (or VAT, depending on the development structure) on the unit purchase price only.