Week 11 - Capital Gains Tax

Question 1

when is a resident subject to CGT?

Answer 1

the disposal of their worldwide capital assets

Question 2

when is a non-resident subject to CGT?

Answer 2

• immoveable property in SA
• any interest or right in immoveable property situated in SA
• assets of SA permanent establishment

Question 3

four requirements for there to be CGT?

Answer 3

asset
disposal
proceeds
base cost

Question 4

what is an asset for CGT?

Answer 4

• property of any nature, incl. interests / rights in such property
• incl. coins made mainly of gold/platinum; not currency

Question 5

disposal definition for CGT?

Answer 5

where an asset was held at some point during the YOA but is no longer held by that person at year end

Question 6

proceeds for CGT?

Answer 6

SP less any amounts already added to gross income

Question 7

trading stock in CGT?

Answer 7

no proceeds as sales income is already included into gross income. there is also no base cost, so no CGT

Question 8

base cost for CGT?

Answer 8

expenditure (what you purchased the asset for) less any allowances and deductions the taxpayer was allowed

Question 9

what else can be included in base cost?

Answer 9

• acquisition costs
• moving / installation costs
• improvements
• transfer/stamp duty, selling costs, advertising
• NOT repair costs, interest expense

Question 10

how to calculate a capital gain/loss?

Answer 10

proceeds less base cost

Question 11

format for CGT calculations when there are multiple assets?

Answer 11

A: capital gain/loss from each item
B: total
C: annual exclusion
D: aggregate gain/loss (B-C)
E: assessed loss from previous years
F: net gain/loss (D-E)
G: inclusion rate
H: taxable capital gain (F x G)&raquo_space; included into taxable inc
I: tax rate

Question 12

assessed capital loss?

Answer 12

• if you incur a loss when disposing
• will be carried over to next year and offset against that year’s gains

Question 13

annual exclusion?

Answer 13

R40 000
only allowed for natural persons and trust
limited to the gain or loss
add for loss, minus for gain

Question 14

certain types of disposals which receive exclusions?

Answer 14

• primary residence
• personal use assets
• gambling, games, competitions
• donations to PBOs

Question 15

exclusions for primary residences details?

Answer 15

• disregard full capital gain up to R2mill
• remove this exclusion before the annual exclusion of R40 000

Question 16

exclusions for primary residences requirements?

Answer 16

• where they/their spouse resides as their main residence which is mainly used for domestic purposes
• only for natural persons/special trusts
• only one residence for a person at a time

Question 17

what is a personal use asset?

Answer 17

any asset mainly used for purposes other than trade, but not including:
- gold/platinum coins
- immoveable property
- aircraft >450kg
- boats >10m

Question 18

what do we do with losses incurred on an aircraft or boat?

Answer 18

para 15
- disregard the loss if aircraft >450kg or boat >10m

Question 19

exclusions for gambling, games and competitions?

Answer 19

• disregard the gains/losses
• only for natural persons
• only if concluded in terms of the laws of the republic

Question 20

exclusions for donations to PBOs?

Answer 20

disregard all gains and losses

Question 21

which section includes capital gains into income?

Answer 21

s26A

Question 22

what are the CGT consequences of personal use assets?

Answer 22

none, disregard cap gain or loss