CGT Deadline – What If You Missed It?

roperty owners who did not meet the 30 September property valuation deadline for Capital Gains Tax will be unable to use the market value of their property to work out the capital gain when they sell.

Jaco Grobler, managing executive at Absa Group Home Loans says this means that the South African Revenue Services (SARS) will then apply either the 80/20 principle or the time apportionment ratio. The 80/20 rule implies that the owner will be taxed on 80 percent of the proceeds when the property is sold, while the time apportionment method means that the entire gain will be "apportioned" to periods before and after 1 October 2001.

Either of these two methods, notes Grobler, might actually result in a lower tax liability, but the best method to use can only be determined at the time of the proposed disposal of the property - "and not meeting the deadline means that the market value method will not be available to the owner as an option".

In terms of the capital gains tax legislation, taxpayers who acquired an asset before 1 October 2001 may, in certain circumstances, use the market value of the asset on that date to calculate their capital gain upon disposal. However, in order to use the market value, the asset concerned had to be valued on or before 30 September 2004.

CGT legislation says that when a natural person or a beneficiary of a special trust is determining his or her aggregate capital gain or loss for a year, he or she should disregard the first R1-million of the gain or loss in respect of the sale of his or her primary residence.

But, notes Grobler, even if your property has not appreciated by R1-million, it is still necessary to calculate the gain, so the market value of your property as at 1 October 2001 (if you had it valued) will still be relevant if you acquired the property before that date. (Property24)

Taken from the Nedbank Property Talk -