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Avoid the CGT tax trap in just 30 minutes!

by , 14 December 2016
Avoid the CGT tax trap in just 30 minutes!One of the most horrific taxes yet to be launched on an unsuspecting public is capital gains tax.

This is basically the amount by which the proceeds exceed the base cost and is a tax you pay on the disposal of an asset.

We will explain the specific inclusion rates that apply to individuals and companies as well as how to work out your base cost.

If you get this wrong, you will pay more than you need to as the base cost also includes improvements you may have made to the asset, as well as many other costs related to the asset.


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Avoid the CGT tax trap in just 30 minutes continued...

Our full list of the main costs that form part of the base cost are published in the Practical Tax Loose Leaf. As well as the full list of assets that are EXCLUDED from CGT.

We will also include a feature on the special dispensation allowed to small business owners when it comes to CGT. This can be quite substantial in a lot of cases and we will take you through the various requirements you need to meet to qualify.

 
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How will capital gains tax affect small businesses?

If you are an owner of small businesses, you have been given a special dispensation when you sell your businesses to retire (Paragraph 57 of the Eighth Schedule). The purpose is to provide relief to small business owners who have invested their resources in their businesses to build up retirement capital.

It does not matter whether the small business is held directly or whether it is a company, close corporation or partnership.

The capital gain or loss on the business is disregarded under the following conditions:
  • The market value of the assets of the business does not exceed R10 million

  • You hold at least 10 percent of the share capital

  • You have been substantially involved in the operations of the business

  • You have held ownership or shares for a continuous period of at least five years

  • You have attained the age of at least 55 years or the disposal is in consequence of ill health, other infirmity, superannuation (retire from service on a pension) or death

  • Your total exemption under this dispensation is limited and may not exceed R1.8 million in your lifetime. The dispensation is cumulative and not for each business or asset disposed of

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Do not attempt to claim more than the R1.8 million to which you are entitled. SARS maintains records of exemptions already allowed and may judge apparent transgressions harshly.

  • All capital gains from the sale of your  businesses must be realised within two years from the date of the first disposal

Remember: when selling more than one business, ensure the total market value does not exceed R10 million, otherwise it won't be disregarded.

Try our complete Tax Advisory Service today. As part of this service you'll receive the Practical Tax Handbook, Five Bonus Reports, 10 updates, a lifelong subscription to the daily Tax Bulletin, and a Tax Helpdesk, where you can ask our tax experts any tax question you may have.


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