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CAPITAL GAINS TAX RELIEF - DISPOSAL OF SMALL BUSINESS ASSETS

CAPITAL GAINS TAX RELIEF - DISPOSAL OF SMALL BUSINESS ASSETS

Author: Natalie Wocke
Date: 2014-08-22
Capital Gains Tax is dealt with in the Eighth Schedule of the Income Tax Act No.58 of 1962. Paragraph 57 deals with an amount that may be disregarded when calculating capital gains, up to R1, 800,000 on disposal by a natural person, of active business assets of a small business. In order to qualify for the exemption the following criteria, among others, must be met.

1 The person disposing of the assets must have attained the age of 55 years, or alternatively the disposal must be in consequence of ill           health, other infirmity, superannuation or death of the owner.

2 The business must be a small business. This can comprise one or more businesses, where the total market value of assets at disposal    does not exceed R 10,000, 000.Active and passive income generating assets of the taxpayer must be taken into account when calculating    the R 10,000,000 limit, but only the gain on "active business assets" held wholly for business purposes qualify for the exclusion. (Not            assets that generate passive income, such as rent, dividends, royalties, etc.) Where an asset is fixed property not used wholly for                    business purposes, the gain relating to the business use portion will still qualify for exemption.

3 The R 1,800,000 exemption is cumulative over the taxpayer's lifetime. The natural person must realize the qualifying capital gains within        24 months, which period will commence on the date of the first disposal.

The contents of this article should not be used as a basis for action without further professional advice. For a proper assessment of whether you qualify for this relief, make an appointment at your nearest branch of Roberts and Chaplin. Tel: Ballito 032-586 0387 and Umhlali  032-947 1010.