Thinking of selling an asset?

What happens when you sell an asset?

When you sell or dispose of an asset, you either realise a profit or a loss from the exchange. When you realise a profit, you are subject to pay capital gains tax (CGT) on that realised profit.

Are all assets subject to CGT?

Not all assets are subject to CGT. Capital assets that are purchased, with the intention to generate income, will be subject to CGT; whereas personal used assets are not subject to CGT.

How does CGT work?

Capital gains are calculated on the proceeds from disposal of an asset, less the base cost of the asset.

The proceeds are any form of remuneration that was received from the disposal or exchange for the asset. The base cost is the accumulation of expenses which were incurred for the asset. Costs that can be included are: purchase price, capitalised/ improvement costs, transfer costs, valuation costs, and installation costs.

If your base cost exceeds your proceeds, you realise a capital loss, but this will not reduce your taxable income and will be carried forward to the next year of assessment to reduce the aggregate capital gains of that year of assessment.

Once a natural person has calculated their aggregate capital gains, they are subject to a R40 000 exemption (R300 000 for a deceased estate) to reduce their assessed capital gain. Also note that the first R40 000 of this capital loss will not be carried forward but added back.

Only 40% (for natural persons and special trusts) of the total capital gains will be included in the taxable income, and the remaining amount will be excluded.

The inclusion rate for all other entities is 80%.

The primary residence exemption

The first R2 million of any capital gain or loss on the disposal of a primary residence of a natural person is excluded from CGT calculation.

Only one resident can qualify for the exemption and it must be the residence in which the person normally resides and can be any structure (boat, caravan, etc.).

What is a deemed disposal?

When a taxpayer emigrates or if the nature of the asset changes, the taxpayer is deemed to have disposed of the asset(s). All assets will be deemed as being disposed of at market value and will be subject to CGT.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)




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IC Marais

Professional experience:

IC Marais is a certified CA (SA) with public sector and private sector technical knowledge based on 5 years’ Public Sector accounting, auditing and financial management experience and 5 years audit, tax and accounting experience. Detailed knowledge of private and public sector accounting and auditing standards (GRAP, IPSAS, IFRS, IAS, ISA) and public sector financial legislation (MFMA, etc.)

He enjoys the outdoors, hunting and fishing.


Professional experience:

In 1995, Schalk started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and then Mazars Moores Rowland in 2007) in Bloemfontein. In 1998, Schalk was appointed as manager at Moores Rowland, where he became a partner in 2003. Schalk received his Postgraduate Certificate in Advanced Taxation in 2006 and in 2009 he received his Certificate in the Administration of Estates.


Professional experience:

Cedric started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and Mazars Moores Rowland in 2007), Bloemfontein, in 1986. After completion of his articles, he joined the Special Investigations Division of the Department of Finance (SA Revenue Services) as a senior inspector from 1990 to 1991.


Professional experience:

Lucha started her career as a tax inspector at the Inland Revenue Department of New Zealand. After this she worked in commerce in Canada, Mexico and the United States.

On her return to South Africa, she completed her CA training contract with us and has been with Newtons ever since. She became a Partner in 2012.

Apart from her CA(SA) qualification she also holds a postgraduate certificate in Advanced Taxation (2005) and has the overall responsibility for training as our Training Officer.