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Simply Online obo AJ Johnston & Partners Attorneys, KZN: Capital gains tax: Everything sellers need to know

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We simplify the legal jargon and answer some of the essential questions around capital gains tax and when and why it is applicable to homeowners.


Article summary

  • CGT applies to all assets disposed of on or after 1 October 2001.


  • Capital gains and losses on the disposal of a primary residence are excluded, limited to R2 million.


  • To calculate your capital gains, subtract the base cost of your property from the value at which you sold it.


If you’re considering selling your home, you should be aware of the tax implications. Capital gains tax, for example, comes into effect on the sale of an asset that is disposed of on or after 1 October 2001, including property. Here’s a rundown of how and when it applies.


What is capital gains tax?

Capital gains tax is a tax on the difference between the price an asset was purchased for and the amount for which it was sold. So if you’re a property seller, you can find out what your capital gains are, by subtracting the base cost of the property (which includes incurred costs such as renovations, transfer costs and attorney fees) from the amount you sold it for.

Bear in mind that capital gains tax is not a separate tax, but rather forms part of your income tax, and becomes payable when you receive your income tax assessment.


What homeowners need to know about capital gains tax

Capital gains on a primary residence (the residence in which the home seller lives) are excluded up to a rate of R2 000 000. If you and your spouse own a primary residence together, the exclusion of R2 000 000 if split between the two of you, so you each qualify for an exclusion of R1 000 000.


What property investors need to know about capital gains tax 

Capital gains tax on a second property in South Africa would still qualify for an exclusion rate of R40 000. If the property owner rented the property out, but also lived in it for a period of time, the capital gains tax will apply to the period for which the property was let out, while the period in which it formed a primary residence will be subject to the R2 000 000 exclusion rate.


What is the capital gains tax rate?

In South Africa, capital gains tax does not have a flat rate. 40% of the capital gain gets added to your income, and you are taxed in the appropriate tax bracket for that year. In other words, it counts as part of your combined earnings.


Acquiring assets

It’s important to keep a record of costs incurred when acquiring an asset, as they may only come into effect further down the line, when you decide to part with the asset.

If you’re looking to acquire a property, or you’ve sold your primary residence and are looking to replace it, bear in mind that ooba Home Loans makes the home-buying process easier by providing a range of tools. Start with their bond calculator; then use the ooba Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.


*Article sourced from Ooba*


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