Missed the boat?

Property owners have one less option.

Property owners who have not not met the deadline of 30 September 2004 for property valuation for CGT will be unable to use the market value of their property to work out the capital gain upon the disposal of the asset, says Jaco Grobler, Managing Executive: Absa Group Home Loans.

Grobler says this means that the South African Revenue Services (SARS) will then apply either the 80/20 principle (i.e. the property owner will be taxed on 80% of the proceeds upon the disposal of the asset) or the time apportionment ratio (i.e. the entire gain will be apportioned to periods before and after 1 October 2001).

The 80/20 rule or the time apportionment ratio may actually result in a lower tax liability, but the best method to use can only be determined at the time of the proposed disposal of the property – not meeting the deadline means that the market value method will not be available as an option.

In terms of the capital gains tax legislation, taxpayers who acquired an asset before 1 October 2001 may, in certain circumstances, use the market value of the asset on that date to calculate their capital gain upon disposal, advises Grobler.

In order to use the market value, the legislation requires the asset concerned to be valued on or before 30 September 2004.

Primary residence exclusion
Where a natural person or a beneficiary of a special trust is determining his or her aggregate capital gain or loss for a year, he or she must disregard the first R1 million of the gain or loss in respect of the disposal of his or her primary residence.

Even if your property has not appreciated by R1 million, it is still necessary to calculate the gain, so the market value of your property as at 1 October 2001 will be relevant in respect of property acquired before 1 October 2001.