Capital Gains Tax: A Beginner's Guide for SA Investors

Capital gains tax (CGT) is triggered when you dispose of an asset — whether by sale, donation, exchange, or other event. Understanding how CGT works can help you plan your investments and minimise your tax exposure.

How CGT Works for Individuals

When you dispose of an asset, the difference between the proceeds and the base cost is your capital gain or loss. Base cost includes the original purchase price plus allowable expenses such as transfer fees, legal costs, and improvements. For individuals, 40% of the net capital gain (after offsetting losses and exclusions) is included in your taxable income and taxed at your marginal income tax rate.

Annual Exclusion

Every individual receives an annual exclusion of R40,000. This is applied to your aggregate capital gains after offsetting any capital losses for the year. In the year of death, the exclusion increases to R300,000.

Primary Residence Exclusion

When you sell your primary residence (the home you ordinarily reside in), the first R2,000,000 of capital gain is excluded from CGT. This is a significant benefit for homeowners.

Example Calculation

If you sell shares for R500,000 that you purchased for R200,000: your capital gain is R300,000. After the annual exclusion of R40,000, your net gain is R260,000. At the 40% inclusion rate, R104,000 is added to your taxable income. If your marginal rate is 31%, the CGT would be R32,240.