#AskATaxMan: What are the CGT implications of selling a non-primary residence?
I lived in my primary residence for 16 years, since 2001, but rented it out in 2017 and will sell it in 2018. What is the Capital Gains Tax (CGT) calculation under these conditions? – Charles
Hi Charles, this is good question, especially since you acquired your property in 2001. As a matter of interest, CGT was implemented in South Africa on October 1st 2001.
An important point that you have highlighted already, is whether the property qualifies as your Primary Residence. You have a CGT Exclusion on your Primary Residence of R2m, but since you rented out the property, your property cannot be regarded as your Primary Residence. There will therefore not be an exclusion of R2m. You do, however, have an annual CGT exclusion of R40,000. Below is a simplified example:
- Base cost of your home in 2001 = R1m
- Selling price in 2018 = R2m
- Your Capital Gain would be = R1m
- Less your Annual Exclusion = R960,000 (R1m – R40,000)
- The CGT inclusion rate in South Africa is 40%, therefore R384,000 is added to your Taxable Income (40% of R960,000)
- Let’s assume that your earn R500,000 p.a. which puts you in the 41% Tax Bracket
- You will pay 41% of R384,000 = R157,440 in CGT
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Donovan is a financial advisor at Money Wise Associated Financial Services who believes in challenging the status quo on how financial advice is currently delivered to clients. He takes pride in showing his clients that financial and other goals are attainable through appropriate planning and affordable solutions. Donovan has completed his Masters in the field of Financial Economics, Honours in Investment Management with distinction and Bachelors of Economics with distinction.
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