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Two things you need to know about Capital Gains Tax

by , 26 September 2014
Capital Gains Tax (CGT) can be extremely confusing. They catch many business owners out simply because they don't have all the facts about this complicated tax.

The biggest mistake most business owners make is assuming CGT applies to every kind of asset.

This isn't true though. SARS is very clear about which assets are subject to CGT and which ones aren't.

Today, we're revealing these two very important things about CGT so you never make this mistake again...

 

Here are ten assets SARS excludes from CGT

 
1. Primary residence. If you sell your home, SARS doesn't take part of this money as CGT.
 
2. Personal-use assets. This is an asset you own in your personal capacity that you don't use for trade or business.
 
3. Retirement benefits. SARS won't touch any lump sum you get from a retirement fund, whether it's local or international.
 
4. Long-term assurance. There's no CGT if your cancel or dispose of a long-term insurance policy.
 
5. Compensation for injuries. SARS can't tax any money you get as workers' compensation for injuries or illnesses.
 
6. Gambling, games and competitions. If you win money through any of these things, there's no CGT on it.
 
7. Collective investment schemes. 
 
8. Donations and bequests to public benefit organisations (PBO). Just be careful of donations tax if you make donations to an organisation that isn't a PBO.
 
9. Exempt persons. You can disregard any capital gain for the disposal of an asset where any amount of any nature is exempt from tax under Sections 10.
 
10. Awards in terms of the Restitution of Land Rights Act.
 
That's the first important thing you need to know. Here's the second.
 
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Here are the nine assets CGT always covers

 
1. Your company's main residence, close corporation, trust (other than a special trust);
 
2. Holiday homes, second homes and properties you let to tenants; 
 
3. A boat that exceeds 10m;
 
4. Caravans;
 
5. An aircraft with an empty mass that doesn't exceed 450kg;
 
6. Shares, unit trusts, private investments and second-hand policies;
 
7. Krugerrands or other silver, platinum, or gold-minted coins. This also applies to any coins that have the market value of the metal;
 
8. The sale of your business, other than on retirement; and
 
9. All other capital assets, except those specifically excluded.
 
Now that you know which assets are taxable, remember to apply this golden rule of Capital Gains Tax to them.
 
Knowing these two things about CGT will help you ensure you always pay the tax on the right assets.

PS. Here are three instances where you don't have to pay Capital Gains Tax... And eight other ways to LEGALLY beat the taxman!
 


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