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Good news: You won't trigger CGT if you dispose of an asset in one of these ways...

by , 17 April 2014
Capital Gains Tax (CGT) is the tax you pay on the profits you make on the disposal (sale) of your assets. The good news is, there are tax breaks and exclusions in South African tax law designed to give you tax relief and lower your CGT bill. And if you dispose of an asset in one of these four ways, then there's no disposal for CGT.

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Disposing of an asset in one of these four ways means there's no CGT

The Practical Tax Loose Leaf Service explains that you won't have to pay CGT on disposal of an asset:

#1: Where you transfer an asset as security for a debt or you transfer that asset back when a security is released.

#2: When it comes to companies and the:

  • Issuing or cancellation of a share in the company;
  • Granting an option to acquire a share or debenture in that company.

#3: By a unit trust scheme for:

  • The issue of a participatory interest in that scheme. When an investor buys into a unit trust scheme, the scheme is effectively selling him a 'participatory' interest in the scheme. In this case, the sale by the unit trust is NOT seen as a disposal for CGT purposes.
  • Granting an option to acquire a participatory interest in that scheme. This is because the investor pays CGT on the disposal of the units.

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That's not all. You won't trigger CGT if you dispose your asset as follows

#4: By a person for:
 

  • Issuing any bond, debenture, or note
  • Borrowing money.
  • Getting credit from another person.
  • CGT will also not come into play when there's a distribution of the Trust's asset to a beneficiary so that he has a vested interest in that asset.


There you have it. Knowing whether or not the disposal of an asset triggers CGT will give you tax relief and help you lower your CGT bill.



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