TAX CHANGES AFFECTING PROPERTY

13 Apr 2012


As from 1 March 2012 the inclusion rate for capital gains tax will be increased as follows:

1. From 20% to 33.3% for individuals, resulting in the increase of the effective tax rate from 10% to 13.3% as a maximum effective rate for individuals;
2. From 50% to 66.6% for companies, resulting in the increase of the effective tax rate from 14% to 18.6%;
3. From 50% to 66.6% for trusts, resulting in the increase of the effective tax rate from 20% to 26.7%.

The above changes are illustrated in the below table:

TAX PAYER INCLUSION RATE STATUTORY RATE EFFECTIVE TAX RATE
Individuals 33.3% 0 - 40% 0 – 13.3%
Companies 66.6% 28% 18.6%
Trusts 66.6% 40% 26.7%


On the other side of the coin there were changes made in regard to the exclusions for capital gains tax that apply to individuals, which are as follows:

1. The annual exclusion has been raised from R20,000.00 to R30,000.00;
2. The exclusive amount on death increased from R200,000.00 to R300,000.00;
3. The primary residence exclusion has increased from 1,5 million to 2 million.

The other notable change was the increase in dividends tax from 10% to 15%, effective from 1 April 2012. This will affect property owning companies and close corporations when selling their assets and distributing the proceeds to its shareholders/members.