Any profits accrued from this date onwards on the sale of specific capital assets will be taxed with CGT. Craig Hutchison CEO Engel & Völkers Southern Africa, explains that CGT is not as cut and dried as it seems and it is always best to chat to a professional in terms of what is owed to “The Receiver”, as this depends on a number of factors.

When do you pay CGT on capital gains?

All capital gains or losses made on the disposal of capital assets will be subject to CGT unless excluded by specific provisions. However, where an asset was acquired before the effective date and disposed of thereafter, tax will only be payable on the capital gain which accrued after the effective date.

Do you have to declare CGT when selling an asset?

Should there be a loss on the asset when sold, it still needs to be declared when submitting your annual income tax assessment. The CGT required is however lower than ordinary income tax. Capital or revenue?

How are capital gains excluded from the basic amount?

For the purposes of provisional tax a taxable capital gain is excluded from the basic amount. If you are not permitted to use the basic amount for the purposes of your second provisional tax payment, you will have to take into account any taxable capital gain that arose or will arise during the year of assessment in estimating your taxable income.

At first glance, Capital Gains Tax (CGT) may seem like yet another thing to worry about when completing a tax return, but it needn’t cause confusion. CGT is not a separate tax but forms part of income tax, which is taxed at a lower effective tax rate than ordinary income. CGT is basically a tax on the resale of assets.

How does CGT apply to the sale of a property?

CGT applies to the profit that you make on the sale of a property . What percentage of the capital gain must be included in taxable income for the year in which the property is sold?

How are capital gains taxed on primary residence?

We also need to apply the capital gains inclusion rate of 40% per individual. The taxable gain (as per the calculation above) on the primary residence must be included: Assume that the annual marginal rate of tax on income is 41%, which is applied to the R424 000, then the capital gains tax will be R173 840.

How are capital gains taxed in a trust?

The effective capital gains tax rate for trusts is 36.0% (80% of the income tax rate of 45%). If the capital gain of a trust is not retained in the trust but distributed to the beneficiaries of the trust, the capital gain will in most cases be taxed in the beneficiary’s hands which will therefore result in a lower effective CGT percentage.

Anyone that disposes or sells their fixed assets, or following the death of the asset owner, is liable for CGT. It came into effect in South Africa on 1 October 2001, this date is considered the “valuation date”, and only gains made on a property from this date are liable for CGT.

Do you have to declare CGT when you sell an asset?

Anyone that disposes or sells their fixed assets, or following the death of the asset owner, is liable for CGT. When submitting your annual income tax return, any gains or losses based on a transaction during that period must be declared and submitted.

How is disposing of an asset exempt from capital gains tax?

Disposing of an asset doesn’t just refer to the sale of an asset for money. It includes any transfer of ownership by way of exchange, gift or settlement on trustees. Transfers of assets between spouses and civil partners are exempt from Capital Gains Tax.

Is there capital gains tax on assets passed on death?

There is no Capital Gains Tax on assets passed on death. When the person who acquired the assets comes to dispose of them they are treated as if they had been acquired at their market value on the date of the death.