TAX- CGT and
RECOUPMENTS
,Things to think of:
When you dispose of an asset
The actual profit from sale is not taxable and therefore needs to be deducted from taxable income if added
Capital gain Recoupment Capital allowances Assessed loss from prev
year
Proceeds =actual – Proceeds =limited to CP S11(e) of useful life
recoupment Base cost = actual – capital apportioned
Base cost = cost + valuation allowances
– recoupment
Add to taxable income
Base cost = remember when
a lease period ends and the
lessor said that lease hold
improvements had to be
made of X amount that
amount must be included in
base cost after deducting
any s11(h) relief for lessor
REMEMBER to think about S9C when shares are disposed of even a donation (remember the 3 year rule )
cost of an asset
cost on date of transfer of ownership
(so if you have a creditor in FC you use the
exchange rate on date the ownership transfers X
PLUS import surcharges X
PLUS output tax (on imported good) X
LESS input tax (on imported good) ()
PLUS installation costs X
Plus transport cots X
LESS input tax on transport costs ()
, SUMMARY:
ITEM CALCULATION REASON Amount
Primary residence CG=R0 IF you brought the primary residence on -
(DISPOSAL) CREDIT and still have an amount
outstanding on the date of the disposal .
there s still NO cap gain loss because:
➔ Primary residence = par45(1)(b)
➔ The proceeds (MV on date of
disposal) was less than R2 million
➔ Therefore the full Capital gain is
disregarded
Kruger Rands MV on date of disposal – CP of X
the krugerrands
Kruger Rands donated to a Proceeds- base cost Par38 – to determine the proceeds (the X
connected person = cap gain market value)
Personal use asset CL=R0 Par(53)- personal use assets cap gain / loss -
(EG car disposed of) must be disregarded
Personal use asset to a non Proceeds= MV TP started his own business and furniture -
personal use asset BC= original cost was moved from his home to his office
BUT disregard any cap gain or Par53(1) – disregard any cap gain/loss on
loss the disposal of a persona use asset
Yatcht (boat) CL=0 The boat is NOT a personal use asset -
(exceeding 10 metres) because it exceeds 10m (par(53)(3)(d)
(with a capital LOSS) HOWEVER par15 (limitation of losses) says
that a boat exceeding 10m in length that
has any capital loss must be disregarded
Shares in a company The taxpayer uses FIFO: X
Example above
Shares disposed of in a Par64B -
foreign company Shares that are disposed of in a non-
resident company .
A resident company disposes of their
foreign shares to a NON-resident company
This cap gain must be disregarded
Shares in a company Disregarded S9HB -
(transfer between spouses) The taxpayer donated all of her shares to
her husband
S9HB says that any cap gain or loss must be
disregarded (irrespective if they are
married in or out of community of
property)
There will be no tax affect for the company
of whom the shares are held in because it is
merely just a change in shareholder
Computer given by spouse Proceeds= MV on date of The husband gave his wife (the TP) a NEW X
(married OUT of community of disposal COMPUTER to be used in her trade.
property) The husband paid R13 000 for the
Base cost = cost the transferor computer
(spouse) paid for the asset ➔ The computer does NOT constitute
a personal use asset as it was used
= cap gain/loss “mainly for the purpose of trade”
, ➔ S9HB= transfer of assets between
spouses
➔ The spouse who receives the asset
(transferee) has a base cost of
what the husband initially paid for
the computer , even though they
got it for free
Fixed deposit Proceeds – base cost A fixed deposit is NOT currency and is thus x
an asset and there is CGT tax on the
disposal of a fixed deposit
Apartment disposed Example above (par25, par 26 ) X
(NOT primary residence )
(pre-valuation date asset Work out B , A and P
Compensation for defamation Par59 -
Any compensation received must be
disregarded
Mortgage loan on primary A liability is NOT an asset and therefore -
residence disposed of there are NO CGT consequences
-
Holiday home donated to Proceeds – base cost Par 22= deals with the amount of donations X
connected person tax to be included in the base cost
(donations tax
Par38= deals with the proceeds from
donation to connected persons
Donations to a PBO Par 62 deals with these type of donations: -
The amount of capital gain or loss must be
disregarded
RECOUPMENTS
,Things to think of:
When you dispose of an asset
The actual profit from sale is not taxable and therefore needs to be deducted from taxable income if added
Capital gain Recoupment Capital allowances Assessed loss from prev
year
Proceeds =actual – Proceeds =limited to CP S11(e) of useful life
recoupment Base cost = actual – capital apportioned
Base cost = cost + valuation allowances
– recoupment
Add to taxable income
Base cost = remember when
a lease period ends and the
lessor said that lease hold
improvements had to be
made of X amount that
amount must be included in
base cost after deducting
any s11(h) relief for lessor
REMEMBER to think about S9C when shares are disposed of even a donation (remember the 3 year rule )
cost of an asset
cost on date of transfer of ownership
(so if you have a creditor in FC you use the
exchange rate on date the ownership transfers X
PLUS import surcharges X
PLUS output tax (on imported good) X
LESS input tax (on imported good) ()
PLUS installation costs X
Plus transport cots X
LESS input tax on transport costs ()
, SUMMARY:
ITEM CALCULATION REASON Amount
Primary residence CG=R0 IF you brought the primary residence on -
(DISPOSAL) CREDIT and still have an amount
outstanding on the date of the disposal .
there s still NO cap gain loss because:
➔ Primary residence = par45(1)(b)
➔ The proceeds (MV on date of
disposal) was less than R2 million
➔ Therefore the full Capital gain is
disregarded
Kruger Rands MV on date of disposal – CP of X
the krugerrands
Kruger Rands donated to a Proceeds- base cost Par38 – to determine the proceeds (the X
connected person = cap gain market value)
Personal use asset CL=R0 Par(53)- personal use assets cap gain / loss -
(EG car disposed of) must be disregarded
Personal use asset to a non Proceeds= MV TP started his own business and furniture -
personal use asset BC= original cost was moved from his home to his office
BUT disregard any cap gain or Par53(1) – disregard any cap gain/loss on
loss the disposal of a persona use asset
Yatcht (boat) CL=0 The boat is NOT a personal use asset -
(exceeding 10 metres) because it exceeds 10m (par(53)(3)(d)
(with a capital LOSS) HOWEVER par15 (limitation of losses) says
that a boat exceeding 10m in length that
has any capital loss must be disregarded
Shares in a company The taxpayer uses FIFO: X
Example above
Shares disposed of in a Par64B -
foreign company Shares that are disposed of in a non-
resident company .
A resident company disposes of their
foreign shares to a NON-resident company
This cap gain must be disregarded
Shares in a company Disregarded S9HB -
(transfer between spouses) The taxpayer donated all of her shares to
her husband
S9HB says that any cap gain or loss must be
disregarded (irrespective if they are
married in or out of community of
property)
There will be no tax affect for the company
of whom the shares are held in because it is
merely just a change in shareholder
Computer given by spouse Proceeds= MV on date of The husband gave his wife (the TP) a NEW X
(married OUT of community of disposal COMPUTER to be used in her trade.
property) The husband paid R13 000 for the
Base cost = cost the transferor computer
(spouse) paid for the asset ➔ The computer does NOT constitute
a personal use asset as it was used
= cap gain/loss “mainly for the purpose of trade”
, ➔ S9HB= transfer of assets between
spouses
➔ The spouse who receives the asset
(transferee) has a base cost of
what the husband initially paid for
the computer , even though they
got it for free
Fixed deposit Proceeds – base cost A fixed deposit is NOT currency and is thus x
an asset and there is CGT tax on the
disposal of a fixed deposit
Apartment disposed Example above (par25, par 26 ) X
(NOT primary residence )
(pre-valuation date asset Work out B , A and P
Compensation for defamation Par59 -
Any compensation received must be
disregarded
Mortgage loan on primary A liability is NOT an asset and therefore -
residence disposed of there are NO CGT consequences
-
Holiday home donated to Proceeds – base cost Par 22= deals with the amount of donations X
connected person tax to be included in the base cost
(donations tax
Par38= deals with the proceeds from
donation to connected persons
Donations to a PBO Par 62 deals with these type of donations: -
The amount of capital gain or loss must be
disregarded
