Taxation 200 – Semester 2
Contents
LA 4: Chapter 17: Capital Gains Tax .................................................... 2
LA 5: Chapter 7: Individuals ................................................................... 8
LA 6: Chapter 8: Employment Benefits ............................................... 14
LA 7: Chapter 26: Donations Tax (S54) ...............................................22
LA 8: The deceased and deceased estate ...................................... 25
1
,LA 4: Chapter 17: Capital Gains Tax
1. OVERVIEW (S26A)
Definition Came into effect 1 Oct 2001
Tax on wealth/ growth
Asset disposed of for more than original cost
To ensure tax system is equitable
CGT consequences determined under Eighth Schedule of
ITA
Normal Tax Gross Income X
Framework + Special Inclusions X
- Exempt Income (X)
= Income X
- General Deductions (X)
- Special deductions and allowances (X)
- Assessed loss (X)
+ Taxable capital gain X
= Taxable income X
Normal tax calculation based on tax tables X
- Annual rebates for individuals (X)
- Medical fees credit for individuals (X)
= Net normal tax payable for the year X
- PAYE and provisional tax (X)
= Normal tax due by/to taxpayer X
2. SCOPE OF CGT
Proceeds Provision Calculation of gain Include in taxable
income
Revenue in Principal Act Include in gross income Included in GI
nature Deduct expenditure/
allowance
Capital in Eighth Calculate proceeds Apply inclusion rate
nature Schedule (Exclude GI amounts) Include portion in
Deduct base cost taxable income
(Exclude deductions)
Calculation
Taxable income
Other taxable income 1 200 000
Net effect of Principal Act
Capital allowance (CP x %) (100 000)
Recoupment (SP ltd CP – TV) 200 000 100 000
Net effect of Eighth Schedule
SP 650 000
Recoupment (200 000)
450 000
2
, Base cost
CP 500 000
Capital allowances (200 000)
300 000
Net capital gain
Proceeds 450 000
Base cost (300 000)
150 000
Taxable capital gain (40%/ 80% x 120 000
150 000)
Taxable income 1 420 000
3. PERSONS LIABLE FOR CGT
Resident World-wide assets irrespective of type/ location
Non-resident Only certain SA assets
4. BASIC RULES/ BUILDING BLOCKS
1. There has to be an asset
2. There must have been a disposal during YOA
3. Base cost must be determined
4. Proceeds on disposal must be determined
5. DETERMINATION OF TAXABLE CAPITAL GAIN/ LOSSES
Capital G/L = Proceeds – Base Cost
P > B = Capital gain
P < B = Capital loss
Annual Natural persons/ special trusts: R40 000
exclusion Taxpayer dies in YOA: Increased to R300 000
Companies/ ordinary trusts: R0
Unused exclusion cannot be carried forward
Aggregate = Sum of capital gains/ losses for the year – annual
capital G/L exclusion
Net capital = Aggregate capital G/L – assessed capital loss brought
G/ Assessed L forward
Taxable = Net capital gain x inclusion rate
Capital Gain - Individuals – 40%
- Companies – 80%
Example Capital gain: R60 000
Capital loss: R110 000
Other taxable income: R200 000
In previous YOA had an assessed loss of R4 000
3
Contents
LA 4: Chapter 17: Capital Gains Tax .................................................... 2
LA 5: Chapter 7: Individuals ................................................................... 8
LA 6: Chapter 8: Employment Benefits ............................................... 14
LA 7: Chapter 26: Donations Tax (S54) ...............................................22
LA 8: The deceased and deceased estate ...................................... 25
1
,LA 4: Chapter 17: Capital Gains Tax
1. OVERVIEW (S26A)
Definition Came into effect 1 Oct 2001
Tax on wealth/ growth
Asset disposed of for more than original cost
To ensure tax system is equitable
CGT consequences determined under Eighth Schedule of
ITA
Normal Tax Gross Income X
Framework + Special Inclusions X
- Exempt Income (X)
= Income X
- General Deductions (X)
- Special deductions and allowances (X)
- Assessed loss (X)
+ Taxable capital gain X
= Taxable income X
Normal tax calculation based on tax tables X
- Annual rebates for individuals (X)
- Medical fees credit for individuals (X)
= Net normal tax payable for the year X
- PAYE and provisional tax (X)
= Normal tax due by/to taxpayer X
2. SCOPE OF CGT
Proceeds Provision Calculation of gain Include in taxable
income
Revenue in Principal Act Include in gross income Included in GI
nature Deduct expenditure/
allowance
Capital in Eighth Calculate proceeds Apply inclusion rate
nature Schedule (Exclude GI amounts) Include portion in
Deduct base cost taxable income
(Exclude deductions)
Calculation
Taxable income
Other taxable income 1 200 000
Net effect of Principal Act
Capital allowance (CP x %) (100 000)
Recoupment (SP ltd CP – TV) 200 000 100 000
Net effect of Eighth Schedule
SP 650 000
Recoupment (200 000)
450 000
2
, Base cost
CP 500 000
Capital allowances (200 000)
300 000
Net capital gain
Proceeds 450 000
Base cost (300 000)
150 000
Taxable capital gain (40%/ 80% x 120 000
150 000)
Taxable income 1 420 000
3. PERSONS LIABLE FOR CGT
Resident World-wide assets irrespective of type/ location
Non-resident Only certain SA assets
4. BASIC RULES/ BUILDING BLOCKS
1. There has to be an asset
2. There must have been a disposal during YOA
3. Base cost must be determined
4. Proceeds on disposal must be determined
5. DETERMINATION OF TAXABLE CAPITAL GAIN/ LOSSES
Capital G/L = Proceeds – Base Cost
P > B = Capital gain
P < B = Capital loss
Annual Natural persons/ special trusts: R40 000
exclusion Taxpayer dies in YOA: Increased to R300 000
Companies/ ordinary trusts: R0
Unused exclusion cannot be carried forward
Aggregate = Sum of capital gains/ losses for the year – annual
capital G/L exclusion
Net capital = Aggregate capital G/L – assessed capital loss brought
G/ Assessed L forward
Taxable = Net capital gain x inclusion rate
Capital Gain - Individuals – 40%
- Companies – 80%
Example Capital gain: R60 000
Capital loss: R110 000
Other taxable income: R200 000
In previous YOA had an assessed loss of R4 000
3
