1. What is Capital Gains Tax in South Africa?

Definition: Capital Gains Tax (CGT) is a tax on the profit when you sell (or 'dispose of') something (an 'asset') that's increased in value.

Purpose: It's part of income tax in South Africa and is calculated on the capital gain (profit) made when disposing of an asset.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( CGT \) — Capital Gains Tax amount (ZAR)
• \( Gain \) — Total capital gain from disposal (ZAR)
• \( Exemption \) — Annual exclusion amount (ZAR 40,000 default)
• \( Inclusion\ Rate \) — Portion of gain included in taxable income (40% default)
• \( Marginal\ Rate \) — Your highest income tax rate (45% default)

Explanation: The gain is reduced by the exemption, then a portion (inclusion rate) is added to your taxable income and taxed at your marginal rate.

3. Importance of CGT Calculation

Details: Proper CGT estimation helps with financial planning, asset disposal decisions, and tax compliance in South Africa.

4. Using the Calculator

Tips: Enter your total capital gain, annual exemption (default ZAR 40,000), inclusion rate (default 40%), and your marginal tax rate (default 45%).

5. Frequently Asked Questions (FAQ)

Q1: What is the annual exclusion amount?
A: For individuals, the first ZAR 40,000 of capital gain is exempt from CGT each year.

Q2: Why are there two rates (inclusion and marginal)?
A: Only a portion (40% for individuals) of the gain is taxed, and this portion is added to your income and taxed at your highest tax bracket.

Q3: When would I change the inclusion rate?
A: The 40% rate is for individuals. Companies use 80%, and trusts use 80%. Special assets may have different rates.

Q4: How do I find my marginal tax rate?
A: It's your highest income tax bracket. For 2023/24, this ranges from 18% to 45% for individuals.

Q5: Are there other exemptions besides the annual exclusion?
A: Yes, primary residence has additional exemptions, and certain small business assets may qualify for rollover relief.