Dear fellow taxpayer,

Last week the Business Day published an article reporting the government’s proposal to rewrite the Income Tax Act. This is in line with plans for the new social security dispensation SARS hopes to introduce in the next year.

SARS and Treasury have been in discussions with the IMF about the rewrite, and the IMF has offered its technical expertise as assistance.

As the Act is 50 years’ old, with amendments and extensions dating back to its promulgation, this is a fairly ambitious task and one unlikely to happen in a short space of time, but I thought it worth mentioning anyway!

Onto more immediate tax changes…

SARS modifies primary residence exclusion for CGT

If you’re a lower- to middle-class income earner, the CGT regime contains several exclusions to help reduce your tax burden.

One such exclusion is if you have a capital gain, or loss, of up to R1.5 million on the disposal of your primary residence!

It gets better…

SARS wishes to reduce the compliance burden and complexity associated with this issue, so from 1 March 2009 the exclusion will fully apply to a primary residence up to a gross value of R2 million!

Base your calculation on the gross proceeds, and you’ll better understand how the exclusion applies on disposal, without resorting to complex capital gain calculations!
 
What does this mean in practice?

If your primary residence has a gross value of less than R2 million, and you decide to sell it, you won’t be liable for CGT.

Just remember: the normal rules (i.e. the previous R1.5 million capital gains/loss exclusion) will apply if your primary residence is valued above R2 million.

That’s all until March,

Jackie Arendse