FINANCE
2 . Capital Gains Tax
Capital Gains Tax applies to individuals , trusts and companies . In this article I will focus mainly on CGT when selling your primary residence vs your non-primary residence as an individual .
CGT forms part of normal income tax . A capital gain arises when you dispose of an asset on or after 1 October 2001 for proceeds that exceed its base cost . Proceeds are the selling price ; base cost is the purchase price plus any amounts spent on renovations or improvements and other cost paid when the property was acquired . Costs such as interest , repairs , insurance , and rates & taxes are normally allowed as a deduction from income or are incurred for personal use and are not allowed as part of the base cost .
The capital gain is taxed at a lower rate than normal income , because only a portion ( currently 4 0 % ) of the capital gain is included in taxable income and not the full profit . When selling your investment , the tax will not be calculated at the same rate as money earned from your salary .
' Source documents are the original records of a transaction which generates a paper trail . These documents are essential to the bookkeeping process as it provides evidence that a financial transaction has occurred .'
SA Real Estate Investor Magazine MARCH / APRIL 2023 41