This financial year will be the year in which many property sellers will encounter CGT for the first time. And they should be prepared, according to Johannesburg-based accountant and tax consultant Paul Nelson, who says that with current high property values even a simple mistake in CGT calculations could result in a tax demand for hundreds of thousands of rands.
Among the most common mistakes he predicts will be:
- Failing to claim, or incorrectly applying, the exemption on the first R1-million of capital gain on a primary residence, and
- Failing to include in the return the market valuation supporting the value of the property on 1 October 2001.
Taxpayers might also fail to claim, or substantiate the cost, of improvements made to the property after 1 October 2001, which will cause them to deduct a lower base cost from the proceeds earned from its sale. He also emphasised the need to declare the capital gain in the correct tax year as the disposal should generally always be on the date of the transfer of the property rather than the date of the sale agreement. Mistakes can be rectified provided one is prompt about it.
Article on Property24