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Revealed: Three facts we bet you didn't know about CGT

by , 03 April 2014
Most tax payers know that Capital Gains Tax (CGT) is a tax you pay on the profits you make on the disposal (sale) of your assets. But only a few truly understand how CGT works. The high number of taxpayers who get penalised by SARS for handling CGT incorrectly is proof of this. The good news is there's a way to avoid errors. And the first step is to understand some of the lesser-known facts about CGT.

Three little-known facts about CGT

Fact #1: Certain assets are subject to CGT

Here are some of the important assets that are subject to CGT:

  • Residence that's owned by a company, close corporation or trust, other than a special trust;
  • Holiday homes or second homes and properties let to tenants;
  • A boat exceeding 10m;
  • Caravans;
  • An aircraft, the empty mass of which exceeds 450kg;
  • Shares, unit trusts and private investments, and second-hand policies;
  • Krugerrands or other silver, platinum, or gold-minted coins, or any other coin, which market value is mainly in the metal it's made of;
  • The sale of your business, other than on retirement;
  • All other capital assets.

So anytime you dispose any of the above assets, you'll trigger CGT and you must account for it correctly.

Experts at the Accounting & Tax Club say 'in the event that you fail to include the taxable capital gain in the appropriate tax return, this error could result in a penalty' in terms of Section 26 A.


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Fact #2: There are instances where you don't have to pay CGT

In this article, we explained that SARS believes it's not fair for you to pay CGT on the disposal of your asset if you're not getting instant financial gain.

'In these cases your CGT consequences are rolled-over and the asset will be transferred on a tax-free basis. Roll-over is a method for deferring a capital gain or loss.'

If you want to find out about when roll-over relief is applicable, checkout the full article where we explain this extensively.

Fact #3: CGT affects you if you work from home

If you use a portion of your residence for business purposes, this portion won't form part of a primary residence. Any gains or losses made on this portion must be included for CGT purposes, says Capital Gains Tax 101: Your ultimate guide to slashing Capital Gains Tax.

'This means if you claim expenses for your office or study at home, that portion of your property will be subject to CGT when you dispose of the property.'

We hope these three facts about CGT have shed some light and that they'll help you understand CGT better so you can avoid penalties of up to 200%.

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