Summary
Summary Capital Gains Tax
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A summary of capital gains tax on the sale of assets including the sale of assets before the valuation date.
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Capital Gains TaxWhere it goes?
Gross Income XXX
Exempt Income (XX)
Income XXX
Deductions/ allowances (XX)
Other inclusions XX
Taxable income XXX
Introduction
Effective from 1 Oct 2001 (valuation date)
Applicable to all disposals of capital assets
Not a separate tax but part of normal tax
Who pays?
SA Residents on worldwide disposals
Non-Residents: fixed prop, interest in fixed prop, assets connected to a
permanent est
Basics
Proceeds XXX
Base Cost (XX)
Capital gain/loss XX/(XX)
Tax is based on net gain
Natural person’s get annual exemption which reduces gains or losses
Separate calc for each asset
Net loss carries over to next year to reduce gain next year
Framework for CGT
, Step: 1
1. Asset involved?
2. Capital in nature?
3. Disposed of in terms of CGT?
4. Calculate economic or accounting profit / loss
Step: 2
Calculate all gains and losses accounting for exclusions
a) Asset
Broad definitions including fixed property, intangibles, precious coins,
goodwill
b) Disposal
Acts or operation of law essentially resulting in the transfer, variation or
extinction of asset
Includes sale, transfer, donation, scrapping, etc.
c) Proceeds
Amount received or accrued to in relation the asset less certain
exclusions
Proceeds = SP – Recoupment
If accrued deemed to be in the current year
Reduced by any amount repaid in the year
If a debt to seller is waived or cancelled on sale reduce proceeds
Not accruing in the year disregard
Cannot be quantified then not accrued
Base Cost
Costs of acquisition + cost of adding or improving
If asset is given for services rendered and is taxed on this value said value
becomes based cost
After VD
Add Disposal Costs and subtract any allowances
Before VD
© VD val + qualifying expenditure
© VD val greater of: MV or TABC or 20% rule
© 20% rule is 20% of Proceeds less exp after 1 Oct 2001
Kink Tests
Determine historic gain or loss
P>B+A P <= B + A
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