The South African Revenue Service (SARS) has provided a guide for taxpayers who are planning to sell their property and capital assets this year. The guide will help them determine if they will be liable for capital gains tax (CGT).
Capital Gains Tax is not payable on:
- The sale of your primary residence if you have owned it for over 12 months.
- A personal use asset such as a motor vehicle, boat or recreational aircraft that is sold after being used for less than 36 months.
- Where there has been a reduction in capital gains because of bad debt provisions or non-business related losses made by an individual or trust during tax periods prior to 2019/20 and these are carried forward as allowable deductions against future capital gain tax liability arising from subsequent disposals of other assets during tax periods beginning on or after 1 January 2020.
Primary residence – R2m for individual taxpayers and R2m for a trust;
If you’re an individual taxpayer, your primary residence is the property where you live. If the property has been your home for at least 24 months before the sale, it’s exempt from capital gains tax. For trusts, however, a primary residence refers to any property that makes up part of their assets and which they use as their principal place of residence or office.
The primary residence is also exempt if they have rented it out during its ownership period but only if:
- The rental income was R3 000 or less per month; and
- The cost of owning and maintaining this section amounts to no more than 6% of all allowable deductions (R2 097 000).
Personal use assets (e.g. household furniture) – R30 000 per taxpayer and R30 000 per trust;
If you sell a personal use asset for more than R30 000, the government will tax you on the profit. Personal use assets are exempt from capital gains tax and you cannot claim any losses made from selling these assets against other income.
Examples of personal use assets include your own home (owned or rented), household furniture and furnishings, motor vehicles that have been used by you and family members personally for over one year, works of art and antiques that have been in your possession for over 12 months before being sold.
- The sale of shares if the cost price is more than R40 000 and you are an individual or if the cost price is more than R300 000 and you’re a trust
How does the capital gains tax apply to individuals?
A capital gains tax of 28% will apply to your gains when you sell shares that were bought at a higher price. This rule applies if:
- You are an individual; and
- The cost price of those shares is over R40 000 (if you are 18 years old or older) or R300 000 (if you are younger than 18 years old).
The sale of trading stock held by a taxpayer as part of their business.
The sale of trading stock that has been held for over 12 months.
The sale of trading stock that has been held for less than 12 months.
Conclusion
Capital gains tax is a complex area. It is difficult to understand, especially if you don’t have any previous experience with it. It’s important to know what you can and cannot claim before filing your return—so make sure you talk to your accountant or tax agent if you have questions!
