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Do you know what happens to your Capital Gains Tax liability when you make a profit without intending to?

by , 04 September 2014
It may sound like a strange statement, but your intentions have a huge impact on your tax liability. Particularly your Capital Gains Tax (CGT) liability.

The rule with this tax is if you dispose of an asset or make a profit in some way, SARS wants a piece of it.

But what if you didn't intend on making a profit,

Surely it's not fair to charge you tax when your intention wasn't to dispose of an asset, but your circumstances forced you to?

 

Your intentions behind a profit can change your CGT liability 

 
Let's say, you set up an office for your business and you buy the premise. Your intention is to use these premises for a long time, so you fix them up a bit and make them look more professional.
 
But two months later, you attract the interest of a major investor. This person say he'll invest in your company, but only if you relocate your business to a particular area.
 
You can't turn down this offer so you put your new premise on the market and, because of the work you put into fixing it, you get a nice profit on the sale. 
 
Your intentions here could change how the courts will rule on your Capital Gains Tax liability.
 
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Here's how you could use this intention to change your CGT liability

 
You can argue that your intention was never to buy the property, fix it up and sell it for a profit. Your circumstances just changed but not your intention to keep those premises.
 
This gives you a good case to argue for why you shouldn't have to pay CGT. Just beware, the courts may not always rule in your favour in this situation, but if you argue your case effectively, they might.

Recommended Product: Capital Gains Tax 101. Your ultimate guide to slashing Capital Gains Tax.
 

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