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Capital Gains Tax in South Africa - Read this before you struggle with new capital gains tax rulings!

by , 04 March 2013
Capital gains tax in South Africa is usually a nightmare for businesses when they sell capital assets. Now, a change to the Taxation Laws Amendment Bill means you'll effectively pay over less capital gains tax - here's what you need to know.

Last week's Budget Speech unveiling has many investors worried, as capital gains tax in South Africa distributed by trusts are now set to be treated as ordinary income. 
 
This threatens to make the use of discretionary trusts punitive from a tax point of view, says IOL's Personal Finance
 
There're also capital gains tax or CGT implications if you try to become compliant with the ownership component of BEE.
 
Because if you sell the shares in your company or sell the business, either sale will give rise to CGT consequences.
 
But don't worry.
 
Because a change to the Taxation Laws Amendment Bill effectively reduces the capital gains tax liability that is triggered by the cancellation or the reduction of debt, says the Business Day's BD Live website.
 
Reduce the base cost of a capital asset to pay over less capital gains tax!

Now, you have the chance to reduce the base cost of an asset on which capital gains will be levied in future.
 
Because 'if you fund a capital asset with debt of R100, and the debt was reduced by R80, the base cost of the asset would be reduced to R20, on which capital gains will only be levied once the asset is sold, and not on the reduction of the debt', explains Doelie Lessing, a tax director at Werksmans, in the Business Day's BD Live article.
 
That's a relief!
 
And it's easy to make sure you pay your capital gains tax when you dispose of assets to avoid tax avoidance penalties. 
 
Here's when to pay over capital gains tax when you dispose of assets
 
Just remember that most capital assets are subject to capital gains tax, says the Tax Bulletin
 
This includes assets like the sale of your business other than when you retire, as well as any holiday homes, second homes and any properties you rent out to tenants, and shares, unit trusts, private investments and second-hand policies.
 
The date of the disposal of assets can't be pre-determined or manipulated, so all you have to do is make sure you declare your asset disposal to SARS.
 
There you have it. It's the easiest way to ensure you're not accused of tax avoidance for capital gains tax purposes!

If you want to find out more about capital gains tax, get your hands on the Practical Tax Loose Leaf. In the Practical Tax Loose Leaf we've got a dedicated chapter on capital gains tax. In it you'll discover:
  • 3 Situations where you don't have to pay capital gains tax
  • 4 Tips on re-organising your business to minimise capital gains tax
  • 3 Rules relating to entities

Get the Practical Tax Loose Leaf here...

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