What homeowners need to know about Capital Gains Tax

What homeowners need to know about Capital Gains Tax

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.

  • 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.
  • Capital gains tax (CGT) is related to the disposal of an asset on or after 1 October 2001, which includes property.

The important things homeowners need to know:

  1. Capital gains and losses on the disposal of a primary residence are excluded, limited to R2 million.
  2. If you and your spouse own a primary residence together, that exclusion of R2 million is split. For example, if you own it equally, you will each qualify for a primary residence exclusion of R1 million. You will also each be entitled to the annual exclusion (2017: R40 000).
  3. The primary residence exclusion does not apply to the portion of a capital gain or loss that relates to any part of the home that is used for business, such as a study or if you rent out the residence.
  4. The capital gain or loss linked to the portion of a property larger than two hectares is subject to CGT.
  5. There is no exclusion or exemption on the capital gain that results from the sale of a second or investment property.
  6. If you let the second property and also live in it before you sell it, you will be liable for CGT for the time that you let out the residence.

There are tax implications with certain exclusions if you are disposing of a primary residence.