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Two ways to reduce your capital gains tax when you sell an asset

by , 19 January 2017
Every time your business sells, donates or scraps an asset, for gain, SARS takes some of your money as capital gains tax. And this chunk gets bigger every year.

In 2015 if you sold an asset you would have paid 18.65% tax on it.

In 2017, the current tax year, you stand to pay 22.4%.

That's a 3.75% increase in just one year.

Let me put that into perspective for you and show you a way to save this year...


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How the increase in capital gain tax rates can negatively affect your cashflow

Let's say your company owns your office premises, worth R3 million. If you sold it in 2015, you would have paid R559 500 capital gains tax on it.

If you sell it now, you'll have to pay R672 000 in capital gains tax.

That's a massive R112 500 difference in tax.

But there are two ways you can reduce the proceeds of your sale and in turn reduce the amount of tax you pay.

But first you need to know which company assets are affected by capital gains tax.

Four company assets you can reduce the proceeds on to pay les tax

If you're looking at selling your business assets, here are the four main ones you need to pay capital gains tax on:

  1. The main residence owned by a company, close corporation or trust, other than a special trust;
  2. Holiday homes or second homes and properties let to tenants;
  3. Shares, unit trusts and private investments, and second-hand policies;
  4. The sale of your business;
Now let's have a look at how you can reduce the capital gains tax you have to pay on these assets.


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Two ways to reduce the proceeds of a disposal and reduce your CGT

You must reduce the proceeds from the disposal of an asset by:
  1. Any wear and tear amount that affects your asset. Take this amount off before you work out the capital gains tax.
  2. Reduce the amount of the asset by the amount you get from the buyer.
  3. Any reduction because of the cancellation, termination or variation of an agreement, the prescription or waiver of a claim, or the release from an obligation.
For the full details on how to reduce your proceeds and exactly how to calculate your capital; gains tax using practical examples, you can use the Practical Tax Handbook. Claim your risk free copy here.

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