Must I pay capital gains tax if I sell my house?

2015-09-23 06:00


Multimedia   ·   User Galleries   ·   News in Pictures Send us your pictures  ·  Send us your stories

QUESTION: I bought my house, which I’ve lived in since buying it, for about R1 million in 2000, and on my auditor’s advice had it appraised in October 2001 for R1,1 million.

Over the years I had about R200 000 worth of improvements done to the house.

I maintained the house well and recently put it up for sale to move to a smaller townhouse. I now received an offer of R3,7 million for the house.

However, I understand that I might have to pay capital gains tax on the sale, and am worried about how much that may be?

ANSWER: To answer your question we’ll need to make one or two assumptions. I accordingly assume that you are a South African citizen and also that the house is your primary home. Both these facts are important for capital gains tax.

In effect capital gains tax is income tax that has to be paid on capital gain made.

Capital gains tax came into effect on 1 October 2001, and it is therefore good that you have an appraisal of your property for this date.

That will help to determine the base cost of the property.

Income tax is applicable to the disposal (removal, alienation and sale) of assets on or after 1 October 2001, and any capital gain that is realised through such a disposal of assets will be subject to income tax, unless it’s specifically excluded.

With respect to the sale of property, capital gains tax will be imposed on any capital gain realised with regards to property being sold.

Part of the capital gain is included in the tax payer’s taxable income for that tax year. In the context of the sale of a house, the capital gain will then be the difference between the yield (the amount gained by the sale of the property) and the base cost (the amount paid when the property was bought).

The inclusion rate for a natural person or special trust is calculated at 33,3% per year during the year of assessment.

There are also certain annual exclusions of a natural person or special trust.

If the person dies in the year of assessment the annual exclusion is R300 000 and the exclusion for a natural person or special trust per year is R30 000.

Importantly futhermore is the exclusion of the first R2 000 000 capital gain on a primary home of capital gains tax.

Where a part of the primary property is used for business purposes that part of the property will, however, be subject to capital gains tax.

If a second home, holiday home or timeshare is sold for profit, the R2 000 000 exclusion is not applicable, because it will then not qualify as a primary home.

As your property has shown quite a large capital increase over time, the possibility of potential capital gains tax does exist.

However, as the calculations to determine if you will pay any capital gains tax can clearly become quite complex, we strongly advise that you consult a tax specialist to assist you with the calculation of your potential capital gains tax exposure, seeing as circumstances can differ substantially from case to case.


Tertia Botha, Associate Phatshoane Henney Attorneys

Join the conversation! encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

Inside News24

Competition regulation for a growing and inclusive economy

ADVERTORIAL: The Competition Commission of South Africa is conducting advocacy work in the South African automotive aftermarket industry and has gazetted a Draft Code of Conduct for public comment.


WATCH: Man films himself going down water slide upside down as things go very wrong…

What is at first an exciting tummy-turning adventure stunt, quickly turns into a scarily bad idea caught on camera. Take a look:


You won't want to miss...

Best date night restaurants in South Africa
WATCH: Ryan Reynolds offers fans a free tattoo in new Deadpool 2 teaser
Should you date your co-worker?
Hip Cape Town bars to discover this summer
Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.