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Capital Gains Tax....Primary Residence Exclusion:

Capital Gains Tax....Primary Residence Exclusion:

Author: Natalie Wocke
Date: 2014-08-15
Part VII of the Eighth Schedule of the Income Tax Act 58 of 1962 exempts the first R2, 000, 000 of any capital gain made on the disposal of a primary residence by a South African Resident natural person. Any capital gain on a primary residence sold for less than R2, 000, 000, will thus not be subject to capital gains tax.

If the primary residence is held by more than one natural person, (e.g.: husband and wife), then the primary residence rebate must be apportioned. Each person may then claim their proportional amount of the rebate, and not the full R2, 000, 000 each.

The primary residence rebate will only apply to the first 2 hectares of land on which a primary residence is situated. The land should be used mainly for private or domestic purposes, and on disposal, the land should be disposed of to the same person who purchases the primary residence. The implications of this are that if one uses the land or residence for business purposes, this will impact on the extent of, and eligibility to claim the primary residence rebate.

In the event that a primary residence previously lived in, is rented out for a time, the rebate will be subject to apportionment.

Taxpayers should always take advice from a suitably qualified and experienced professional, who has relevant experience in the area in which they are seeking advice. Roberts and Chaplin have branches in Ballito (032-586 0387) and Umhlali (032-9471010), to service the needs of local families and businesses.