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Make sure you know which assets are subject to capital gains tax
Before you can dispose of your assets you need to know which assets are subject to capital gains tax
and if you miss one of these you could be penalised by SARS. Any capital assets are affected.
Here are some of the most important ones you need to know about:
Your holiday home/s or second home and any properties you rent to tenants;
Shares, unit trusts and private investments, and second-hand policies that you may have;
A boat exceeding 10 meters;
Krugerrands or other silver, platinum, or gold-minted coins, or any other coin, which market value is mainly in the metal it is made of; and
The sale of your business that takes place other than when you retire.
Read on to see how to avoid capital gains tax
errors and a 200% penalty from SARS.
How to make yourself invisible to SARS
The key to reducing how much tax you pay is staying off SARS' radar.
SARS has conducted R1.8 million audits. They've added 100s of new tax collectors and auditors to their payroll and each one has his own collection targets to meet.
This means two things:
If you're not compliant, your chances of an audit this year have just doubled, and
You will pay more in penalties.
But there are 139 perfectly legal ways for you to make yourself invisible to SARS. Here's how…
Avoid capital gains tax errors and a 200% penalty from SARS
Now that you know which assets are subject to capital gains tax
let me share some of the disposal timing secrets with you.
Remember, the date of the disposal can't be pre-determined or manipulated.
The timing rules simply help you to identify the time, in respect of the various forms of disposal, that the disposal will take place for capital gains tax
1. General timing rule
When you sell an asset, the time of disposal will be the date your asset actually changes ownership. This is generally when you deliver the asset to the new owner and they take on the risk.
2. Special timing rules apply in special circumstances
Certain timing rules apply to special circumstances. For example in the case of a donation of an asset, the date of compliance with all legal requirements for a valid donation will be the date of disposal.
3. If you scrap or lose an asset
The date of disposal for a lost or scrapped asset will be when you receive full payment for your asset or if there is no compensation the date will be when you establish that no compensation will be payable.
4. Deemed disposals
If your disposal is seen as a capital gain it is known as an 'event'. The disposal date is the day immediately before the day that the event occurs.
If you don't include the taxable capital gain in the appropriate tax return, you could face penalties from SARS.
The capital gain constitutes taxable income in terms of Section 26 A of the Income Tax Act
, so failing to include it in your return would be a serious error.