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Two easy ways to ensure SARS won't label you a CGT avoider when you dispose of assets

by , 02 April 2013
Last year, the South African property sector was one of the best-performing global property markets, delivering a 15.2% total return. But the disposal of said property led to much confusion among business owners who still aren't sure how capital gains tax works. Here's what you'll need to do when 'disposing of' a property to stay on the right side of SARS when it comes to capital gains tax.

Last year's property market profits showed the highest increase in 18 years. 
Larger shopping centres in particular experienced high demand, which drove strong rental and capital gains, writes the Business Day's BD Live website. 
But it's these stronger capital gains that worry business owners.
Many say they aren't sure they've paid capital gains tax over to SARS correctly when 'disposing of' a business property.
Especially as SARS's definition of 'disposal of an asset' is broad, including the 'creation, variation, transfer or extinction', of an asset.
Now, SARS is also increasing the amount of tax audits it conducts – and capital gains tax is one of the areas you're most likely to be labelled as a 'tax avoider'.

1. Keep all tax records for five years to satisfy SARS that you're paying CGT correctly each time you dispose of an asset
Failing to keep proper tax records for the required five year period SARS stipulates is the easiest way for SARS to label you as a tax avoider, says Bizcommunity.
And the most important of these, from a capital gains tax perspective, is your asset register.
This will prove you've paid your capital gains tax correctly to SARS and ensure you aren't labelled as a 'tax avoider', says the Tax Bulletin.
2. Check your tax returns to make sure you're paying over capital gains tax correctly before SARS audits your business!
FSP Business also recommends you also conduct assets and liabilities tests to check whether you're paying your capital gains tax over correctly.
The best way to do so is to check that you've mentioned any assets you've disposed of in that tax period, like property, under the 'assets and liabilities' section of your business in your tax return.
If SARS does then audit your business, at least you'll have proof of accounting for all your assets correctly.
Best you do so, because if SARS finds you've been underpaying your capital gains tax, you'll face hefty penalties and interest, says FSP Business.

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