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#AskATaxMan: What are the CGT implications of selling a non-primary residence?

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Q

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

A

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.


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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

Got a pressing question? Email mariette@hometimes.co.za and we’ll be sure to assist


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Donovan KB Money Wise

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.

 

 

 

 


Disclaimer: The information above is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by HomeTimes and Money Wise Associated Financial Services CC. Any expression of opinion is personal to the author and the author makes no guarantee of any sort regarding accuracy or completeness of any information or analysis supplied.

 

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Mariette Steynberg is a qualified economist with a post-graduate diploma in financial planning. She has enjoyed working on holistic financial plans for clients in various stages of life, as well as a development economist assessing the socioeconomic impacts of new developments. When she is not working, Mariette enjoys parenting her quirky, delightful toddler girl. Cloth diapering, Eskimo kisses and the importance of reading to your child are all causes close to her heart. Mariette is passionate about financial education and hopes to use the experience she has gained to share knowledge with HomeTimes’ readership. Her goal is to provide information that is implementable by everyone.

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