Firstly, what is ‘capital gain'?
Capital gain is the profit you make when an asset, such as shares, unit trusts or property, is sold. The profit is the difference between the price that you bought the asset for (as well as anything you might have added to this original price), and the price at which you sold it.

What is ‘capital loss'?
In light of the above, it's important to note that as from 1 st October 2001, capital gains became subject to GST, but you will only be taxed on the part of the capital gain that has accrued after 1 st October 2001
Assets which are not affected by GST are:
• The property in which you reside, UNLESS you make a profit of more than R1 million, OR the property size exceeds 2 hectares.
• Your car, UNLESS private use is excluded and you use it solely for business purposes.
• Personal effects such as clothes, jewellery, collector's items.
• Lump sums from provident, pension, endowments and retirement annuities.
• When you exchange foreign currency.
• The sale of your business UNLESS you make a R500 000 profit or more.

All other assets are subject to GST
What is the rate of GST?
Individuals and Deceased Estates – 25%
Companies and Close Corporations – 50%

NOTE: All capital gains are subject to a deduction of R10 000 before the GST rate is applied.
You will declare any capital gains as part of your normal income tax return.

An example:
A second property is purchased at R250 000
Swimming pool added R 45 000
Total base cost R295 000
Property is sold for R395 000
The capital gain is R100 000
First R10 000 is exempt R 10 000
Amount subject to GST R 90 000
25% of R90 000 R 22 500
This R22 500 is then added to your taxable income and taxed at your average rate.

What is meant by base cost?
Base cost is the cost of an asset as it relates to residential property. Base cost includes the following:
• The cost of the property
• All improvements
• All costs, including agency or broker fees, transfer costs, professional fees (e.g. accountant, lawyer, quantity surveyor etc.)
• VAT

How do I value my property which has been purchased before 1 October 2001?
Since the valuation of your property has to be submitted to the Receiver of Revenue, it is of the utmost importance that it is accurate. You need to call in either a professional assessor (ask a consultant at your nearest banking branch to refer you), or an estate agent to ascertain the current market value of your property.

What records am I expected to keep?
In the case of a property, you need to keep the following records:
• The date the property was purchased
• The purchase price
• Purchase costs (lawyer fees etc.)
• Receipts for improvements to the property
• The date the property was sold
• The selling price and any commissions paid
• The profit or loss made

Exemptions from the ‘Second Property' rule:
Where the taxpayer is absent from his/her property for a period not exceeding two years, special relief may be afforded. For example, if a taxpayer struggles to sell his primary residence, and in the interim acquires another property to live in, the first home will not be subject to GST if it is sold within a two-year period .