# Capital gains Tax - do you know how it will be calculated?



## Chris Green (Jul 20, 2010)

How will capital gains tax be calculated from March 2012 onwards. Remember that the calculation you need is based on the individual and not on a trust or company. 

So to give you an idea -

Capital gains tax only applies to the disposal of capital assets.

‘Capital assets’ can either be ‘physical assets’ such as property or a ‘right’. An example of a right would be something like ‘good will’ – Cash (and life insurance for that matter!) is not a capital asset!

A ‘disposal’ might be the ‘actual physical disposal’ of the capital asset by sale or it could be the ‘deemed disposal’ of an asset. An example of a deemed disposal would be death of the owner which is a topic for another day.

What’s important is that a capital gain or capital loss must be determined for each asset that you dispose of during any one tax year. Total capital gains are then offset against total capital losses resulting in a net gain or net loss.

Here are the important capital gains tax changes for 2012:

The inclusion rate for individuals has jumped from 25% to 33, 33%. This means that more of your capital gain is now being included in the tax calculation. The maximum effective rate has now risen from 10% to 13, 33% for the top tax bracket

The inclusion rate for companies has risen from 50% to 66, 67%, making their net effective rate 18, 67%.

The bad news for trusts is that the inclusion rate has also risen from 50% to 66, 67%. The net effective rate applicable to trusts is now a whopping 26, 67%.

The annual capital gain/loss exclusion has increased from R20, 000 to R30, 000 for individuals and special trusts.

The exclusion on death for individuals has risen from R200, 000 to R300, 000.

The primary residence exclusion applicable to homes which are worth less than R2 million, is the full R2 million as before. If your primary residence is worth more than R2 million, then the exclusion has increased from R1. 5 million to R2 million, you lucky devil!

If you happen to own an interest in a small-business where the market value of its assets are less than R10 million, and you are over the age of 55, the small-business exclusion has been increased from R900, 000 to R1, 8 million. Previously, the maximum market value of assets required to meet the small-business definition was R5 million, but this has now been increased to R10 million.

So this means the tax man is targeting the more wealthy folk.

I would love your thoughts and input here!


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## vegasboy (Apr 28, 2010)

It boils down to the fact that the more wealthier South Africans who are (ironically) NOT a burden to the state coffers, are being burdened to a point where they will just become more creative and find other ways of doing business. Have you noticed that many big corporations in South Africa now have branches all over the world. Hehehe.

A very wealthy US guy, a Republican, yesterday explained to me how Obama ridiculed the previous administration for giving tax breaks to the rich buying private jets etc. He gave details on how many jobs the manufacturing, maintenance, storing etc. for each jet would create, and how it could help the economy. 

If the rich man gets richer, and in the process acquires expensive 'toys' that create jobs, why not? If you can get him to pay millions instead of thousands to travel from A-B, I'd say it's a good way to move money from the have's to the have not's. It's a win-win situation.

As my friend said: Do you think that by taxing the rich to death they are going to stop buying Versace and opt for WalMart? Never. In stead of employing more people, the will start working smarter and lay off people. Those who stay, will work harder for the same salary. The rich man will never lose, the worker will pay the cost - always.

Now apply the above concept to South Africa. Farming has changed from massive labor forces to precision farming, where computerized farm equipment are taking over a lot of the work, while millions have no jobs.

If government wants to create jobs, they should do exactly the OPPOSITE of what they are currently doing: they should give tax breaks to people building, buying and selling real estate, they should decrease capital gains tax. How stupid can they be. There ARE ways around paying these exuberant taxes.

Government needs more money, they say, to stimulate employment. They shouldn't create jobs, it's not their business. Businesses should. But government can stimulate the process by helping Business to create goods and services people would WANT to buy i.e. property, planes, boats, cars etc. by gearing the tax system.

You see, the rich will still buy their planes, boats and luxuries even if they are taxed to death for doing so, but they will, and they are, do it in other countries. As my friend said, I'll go to Mexico and buy my new boat there. I'll buy my new Villa there too.

And here in South Africa, while the wealthy are being milked dry through i.e. CGT, most of them are silently taking out as much as possible capital, to the US, Spain, Australia, New Zealand and wherever they feel they aren't milked to death.


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