Reducing the impact of capital gains tax

A Fin24 user wants to know how he could reduce the impact of capital gains tax when selling off shares on the JSE. He writes:

Can I avoid or reduce the impact of capital gains tax when I sell off my shares on the JSE by  using  the proceeds to purchase a retirement annuity or pension?

My logic is: I invested on the JSE for my retirement, should I not get the same or similar benefits as a pension scheme?

Marc Sevitz of TaxTim repsonds:
Unfortunately the capital gains effect cannot be offset by purchased annuities as the two events are seen as separate for tax purposes.

While both can be considered forms of “retirement planning” there are no upfront premium or contribution deductions for investments onto the JSE.

Furthermore, investments made on the JSE are not regulated in the same way as pension funds or retirement annuities and can be withdrawn at anytime.

The profits or capital appreciation earned is then taxed with no other tax consequences.

When you make a contribution to a fund you are allowed a tax deduction for this. So in fact when you do use your proceeds to contribute, you will already be getting a tax break.

The overall effect is a reduction in the total taxes paid for the year.

When you withdraw from a fund at the end of its life or on retirement you will be taxed on that withdrawal anyway.

So regardless of how you “save for retirement” there are still tax consequences when you finally receive the money.

- Fin24

Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.

Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
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