One of the disadvantages of registering your home in the name of a legal entity is that you (or more accurately the legal entity in whose name your home is registered) will not be entitled to the Capital Gains Tax exemption which applies in respect of primary residences (the residence in which the home seller permanently resides) which are registered in the name of natural persons.
Capital Gains Tax (CGT) came into effect on 1 October 2001 and is payable when you dispose of an asset after that date. But there are certain exclusions, one of which applies to the sale of residential property. If a residential property is registered in the name of a natural person and is the primary residence of that person then an amount (determined from time to time by the authorities) is excluded from any CGT that may be payable. At the time of the publication of this article (2025) the amount excluded as aforementioned is R2million (but this can change from time to time). So, if you sold your property when the aforementioned exclusion applied no CGT would be payable on the first R2million of the profit that you made. However, this exemption does not apply if your residence is registered in the name of a legal entity like a company, close corporation (CC) or trust.
Amendments to the Transfer Duty Act (made many years ago) also eliminated one of the advantages (or perceived advantages) to registering a residence in the name of a legal entity. Prior to the abovementioned amendments if a residential property was registered in the name of a CC or company transfer duty could be avoided when the property was sold if the purchaser purchased the shares in the company or membership interest in the CC. It remains a contentious issue whether transfer duty could be avoided if the property was registered in a trust and the purchaser “purchased” the trust. However, in terms of the abovementioned amendments transfer duty is now payable even if the purchaser “purchases” the company, CC or trust which owns the property.
Notwithstanding the above there are certain potential advantages to having even your home registered in the name of a legal entity. For example, having your property registered in the name of a trust may provide certain estate planning advantages. Furthermore, having your property registered in a legal entity could provide protection against creditors. Businessmen in particular are sometimes prepared to accept the disadvantages of having their home registered in a legal entity in exchange for the advantage of protecting this asset against claims by business creditors in the event of their businesses running into financial difficulty.
It is not possible to give general advice on the issue of whether or not your home should be registered in the name of a natural person or a legal entity. It is probably safe to say that having regard to current legislation the average man in the street is better off registering his home in the name of a natural person. In the case of people who have their own businesses and people who have large estates it may well be worth considering registering your home in the name of a legal entity. Each case will have to be judged on its own merits having regard to the legal and tax implications and expert advice should be obtained from legal and tax practitioners if you are contemplating registering your primary residence in the name of a legal entity.
(Disclaimer: This article is for information purposes only and do not constitute legal or other professional advice)
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