CGT Boost for Property Market – Budget 2009

The information in this article is courtesy of Realestateweb (Property market gets CGT boost – 11 February 2009)

Thanks to Finance Minister, Trevor Manuel, home sellers can expect a tax boost. This comes after the 2009 Budget Speech revealed that government will be raising the capital gains tax (CGT) exclusion on the sale of primary residences to a gross value of R2m form R1,5m. Manuel also intends to make the calculation simpler and reduce the compliance burden by basing the CGT calculation on gross proceeds.

At the moment CGT is applicable on primary residence sold for more than R1.5m and is calculated as a percentage of the gain.

The National Treasury in Budget states that the capital gains tax regime contains several exclusions designed to reduce the tax burden for lower-and middle-income earners. One such exclusion is for an individual’s primary residence: a capital gain or loss of up to R1.5m upon the disposal of such a residence is excluded from taxable capital gains.

This means that the taxpayer would have a better understanding of how the exclusion applies on disposal, without resorting to complex capital gain calculations. However, the capital gains tax exclusion will fully apply to the primary residence up to a gross value of R2m, according to the Treasury.

As a result, people selling their primary residence with a gross value below R2m will not be liable for capital gains tax. For primary residences valued above this threshold the normal rules - including the current R1.5m capital gain or loss exclusion – will apply.

The property market will also be influence by the annual exclusion ceiling for capital tax and losses that went up from R16 000 to R17 000 for individuals.

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