Most homeowners will be aware of Capital Gains Tax (CGT was legislated in 2001) on property. Those who sell a residential / holiday property may be subject to tax on any profit arising on the sale.The selling price of the property is crystal clear but the costs allowed to be deducted from the selling price need further explanation.
Have you maximised the deduction of allowable costs? By following a couple of easy steps you can reduce your tax liability!
Ensure all CGT allowable costs are deducted from the selling price.
These costs may include the following:
Original amount paid for property (perhaps a property valuation if purchased before 1 Oct 2001)
Attorneys and surveyors fees incl.VAT
Costs of improvements eg new pool, extra room, additional garage
Agent’s commission on sale
Other costs of sale
Costs such as rates and taxes, insurance, bond interest cannot be taken into account.
Distinguish between repairs and improvements.
Repairs are not deductible for CGT so, if you arrange to have repairs and improvements carried out simultaneously, arrange for your builder to provide separate quotes and invoices for the different jobs.
Also, “before” and “after” photographs and any building plans provide additional evidence regarding improvements.
File the proof.
It is important that once you purchase a property, you start filing each and every original invoice / receipt, building plans, other evidence for any item which may reduce your tax liability.
Remember, the onus is on you to provide the supporting evidence to SARS, if required.
If in doubt, consult your tax adviser, always.
©2013 Laurence van Blerck PPRE, B Com (Hons), CA (SA)
Queries relating to this article can be emailed to email@example.com