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Provisional taxpayers be warned: Don't submit your tax return without calculating CGT

by , 28 January 2013
Provisional taxpayers be warned: Don't submit your tax return without calculating CGTProvisional taxpayers have until the end of February to file their tax return through eFiling. But don't overlook your capital gains tax (CGT) liability when estimating your upcoming provisional tax payments, warns Jackie Arendse of the South African Institute of Chartered Accountants (SAICA) on MoneyWeb...

Provisional taxpayers only have until 31 January to submit their tax returns to SARS via eFiling. But before you hit the 'submit' button on your tax return, double check you've included your taxable capital gain.
 
'Failure to account for capital gains tax in you provisional [tax] return could result in heavy penalties for taxpayers basing their second provisional tax payments on estimates of taxable income lower than the basic amount, cautions Arendse.
 
'If you're a provisional taxpayer and you estimate your taxable income for the first, second and third provisional tax periods, you must take your capital gain for the year into account, unless you're entitled to base your estimate on the 'basic amount' (i.e. last year's taxable income.), explains the Practical Tax Loose Leaf Service.
 
'To do this, simply exclude any taxable capital gain from the basic amount for an earlier year of assessment, because the taxable capital gain is usually irregular,' it continues.
 
When do you have to pay CGT?
 
'Affected capital assets are considered to be property of any kind, including assets that are movable or immovable, tangible or intangible, excluding trading stock and mining assets qualifying for an income tax deduction as capital expenditure,' states SARS' Guide to Capital Gains Tax published on http://www.treasury.gov.za
 
With such a complicated explanation, it's easy to see why many provisional taxpayers who submit their own tax returns are unsure of what assets actually trigger CGT.
 
Use this list to ensure you're not one of them.
 
Before you work out your capital gains tax liability, know this…
 
In essence, all assets regardless of their nature are considered affected capital assets and, therefore, are subject to CGT.
 
This includes assets like:
 
  • Land
  • Mineral rights
  • Office blocks
  • Plant and machinery
  • Motor vehicles
  • Shares
  • Kruger rands and much more.
 
If you're unsure how to work out your capital gains tax liability or need more information on whether you need include an asset in your capital gains tax calculation, speak to a professional tax consultant today. Failure to do so could land you in hot water with SARS.

To get the lowdown on Provisional Tax, check out this great Provisional Tax 101 e-book!


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