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If you have a December or January financial year end, you can save on CGT

by , 02 November 2016
If you have a December or January financial year end, you can save on CGTWith December around the corner, you only have two months left to save some money on your capital gains tax bill.

The new Capital Gains Tax (CGT) rates came into effect on 1 March 2016, but SARS has given you until the end of the December/January financial year-end to use the old CGT rates.

But why is this? And how will it affect you?

Let's take a look...



Eight ways to LEGALLY beat the taxman

There are a few CGT loopholes that can save you thousands of rands every single year and, in some cases, let you off the CGT hook completely…
 
Click here to get your hands on them

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How you can use the old CGT rates to save money


The new inclusion rates of 80% apply to all tax years starting on or after 1 March 2016. So, if your next tax year starts after 1 March 2016, you'll only have to use the new inclusion rate on capital gains in the next tax year.
 
Let's look at example to see how much you could save…
 
Ted's Machinery (Pty) Ltd has a December year end. Ted plans to sell an asset in October 2016. He bought it for R500 000 (i.e. this is its base cost). This type of asset is imported, and the cost of a new one has skyrocketed. Ted can sell the second hand asset for more than he paid for it. He ends up selling it for R750 000 when October comes around – making a capital gain of R250 000.
 
How much of the gain will he include in his declaration to SARS?
 
Keep reading to see…

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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. It's added 100s of new tax collectors and auditors to its 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 here's how you can make yourself invisible to SARS

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How Ted saved R9 380 in tax
 
Base cost of asset R500 000
Capital gain R250 000
CGT Inclusion rate 66.6%=R166 500
 
The company will declare a capital gain of R166 500 to SARS, and at 28% tax rate, this is R46 620.
 
But what if Ted's company year-end was February? The new inclusion rate of 80% would have kicked in, and he'd have had to pay tax on R200 000, which would be R56 000.
 
Ted saved R9 380 in tax.


So, now you know how to save on your CGT costs. But, did you know there are three instances when you don't have to pay CGT at all? Turn to the CGT chapter in the Practical Tax Handbook to find out how.

P.S. The key to reducing how much tax you pay is staying off SARS' radar. And there are 139 perfectly legal ways for you to do this. Here's how….

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