Capital gain tax

Question 1

normal tax framework for capital gain tax

Answer 1

added after income as other inclusions

Question 2

when was CGT introduced

Answer 2

1 October 2001

Question 3

Question you should ask yourself

Answer 3

1. Is there an asset involved in the transaction?(if yes move to number 2, if no then no CGT)
2. What is the nature of the asset? Income or Capital?(if it is capital in nature move to no.3
3. Would the transaction constitute a disposal for CGT purposes? (if yes move to the next step)

Question 4

proceeds calculation

Answer 4

=selling price - recoupment
recoupment =selling price (limited to cost)-tax value
tax value = cost -capital allowance

Question 5

Base cost, qualifying expenditure

Answer 5

-Costs incurred in acquiring or creating an asset
-Direct costs incurred in relation to the original acquisition of the asset (e.g. moving costs, transaction costs)
-Direct costs incurred in relation to the disposal of the asset (e.g. sales comm; advertising, legal costs)
-Expenditure to improve or enhance the value of the asset

Question 6

base cost exclusions

Answer 6

 Borrowing costs
 Repairs and maintenance
 Protection and insurance
 Rates and tax

Question 7

Base cost calculation

Answer 7

=cost price - amounts preciously claimed as deductible/allowance

Question 8

annual exclusion

Answer 8

-only for a natural person
-40 000

Question 9

primary residence exclusion

Answer 9

-natural person can only have 1 primary residence
- If the resident is sold for more than R2million, up to R2 million of the capital gain or loss must be disregarded (not taxed) (minus the 2million)
 If the resident is sold for R2million or less, the whole capital gain or loss must be disregarded.(not taken into account) (mostly will be )

Question 10

tax capital gain

Answer 10

80% for companies
40% for individuals

Question 11

personal use of assets excluded from capital gain tax

Answer 11

 Private car
 Art collection
 Jewellery
 Furniture/antiques

Question 12

personal use of asset subjected to Capital gain tax

Answer 12

 Coin made mainly from gold/platinum (e.g. Krugerrand)
 Immovable property
 Financial instrument
 Short-term insurance policies over non-personal use assets
 Long-term insurance contracts
 Aircraft with empty mass exceeding 450 kg
 Boat exceeding 10m in length
 Any fiduciary or usufructory interest (time share is a common one

Question 13

Gambling, games or competition

Answer 13

-foreign winnings are subjected to CTG
-All winnings (local and foreign) of a company are subject to CTG