Capital gains tax (CGT) takes effect on Monday. The new tax has a number of implications and introduces some tricky questions.
Question:
Peter Baxter says he has a 2.02 ha property valued by agents at less than R1 million. It is his primary residence. He wants to know whether he will be liable for CGT if he sells the property after Monday. If so, would the CGT be applicable to the whole property, or would it apply only to that portion of the property which exceeds two hectares, he asks.
Answer:
The South African Revenue Service (SARS) says the exclusion of up to R1 million of a gain or loss on the disposal of a primary residence, together with the land on which it is situated, applies to a maximum of two hectares of land used mainly for domestic or private purposes. CGT would be levied on the excess.
Question:
Robyn Wilmink of Hout Bay, would like to know whether a couple who have lived on a boat, which is longer than 10m, for a number of years, will be exempt from CGT if they sell the boat after Monday, as the boat is their primary, and only, residence, - or will SARS tax any gain on sale as the disposal of a luxury item, he asks.
Answer:
SARS says a boat used as a place of residence by an individual is specifically included in the definition of a residence, as is a mobile home and a caravan. A boat will therefore qualify for a primary residence exclusion on the same basis as a more conventional residence.
Question:
As the base cost of a quoted share is taken to be the weighted average price of the share over the five days preceding October 1, James Winter wants to know if anybody will be publishing a list of these base prices which one can keep for future reference?
Answer:
SARS says the list will be published on SARS Online ( www.sars.gov.za) and in the Government Gazette. Personal Finance will also be publishing the base value figures of both shares and unit trusts over the next two weeks. These figures will also be published in the forthcoming issue of Personal Finance magazine, which will have a special CGT focus. This issue will be available at CNA and Exclusive Books stores nationwide from October 19.
Question:
RM Travers says he and his partner moved from Florida last year and have let their home there. They now live in a life right cottage in a retirement complex in Somerset West. They do not own the cottage and when they eventually leave the capital cost will be returned to them, without interest or growth. Travers wants to know if he is correct in assuming that the house in Florida is, insofar as CGT is concerned, still their primary residence, so that when it is sold CGT will not be payable.
Answer:
SARS says that, as Travers no longer appears to be ordinarily resident in the house in Florida, it will not qualify for the primary residence exclusion.
Question:
A reader, who read an article in Personal Finance about the exemption from transfer duty and stamp duty for people who want to transfer property from a trust or closed corporation into their own name in order to qualify for the primary residence exemption from CGT on the property, wants to know if the stamp duty exemption applies to unit trusts? He says that as a trustee and a beneficiary of a trust he has unit trusts with three investment companies. Two of them advised him that transfers into his name were free, while the third one, namely BoE, insisted that stamp duty of 2.5c per R10 was payable.
Answer:
SARS says the answer to this is no. The exemptions discussed specifically relate to the transfer of a residence.