Minister of Finance Trevor Manuel has announced the extension, by a year, of the deadline for the evaluation of second properties in terms of the capital gains tax (CGT) legislation to September 30 2004.
Making the announcement in Parliament on Wednesday afternoon, the minister said that there was a shortage of evaluators in South Africa and the government had acceded to requests, mainly from individual property owners, for an extension.
“We have looked at the situation; we were inundated with requests,” said
Manuel added that the government had taken the decision with some reluctance.
He noted that the deadline had first been extended by six months and then again by two years.
Asked specifically if that meant that no CGT would be paid on the sale of property — either on one’s primary property where a profit of more than a R1-million is made or other properties — for another year, he said: “I will have to take advice on that but I wouldn’t imagine that unless you have a starting value you can calculate the capital gains tax is.
“You enter the realm of conjecture and I think that would disadvantage taxpayers.”
He said there was no adjustment on the budget revenue as a result of the change.
“You aren’t paying a tax on the amount you have but in the event of the sale of the assets.”
The September 30 2003 deadline was set two years ago by the South African Revenue Service and it required businesses and property owners to obtain valuation certifications, which for businesses covered fixed and intangible assets.
Those certificates were expected to reflect the value of the assets as of October 1 2001, when CGT came into effect — and indeed the CGT liability was to be calculated at the time of sale on any gains or losses made since the introduction of the tax as from that date.
The introduction of CGT was first mooted by Manuel in February 2000 and its implementation was delayed from April to October 1 2001. It was expected that about R2-billion would be generated yearly by the new tax.
The provisions of the tax include that 25% of an individual’s capital gain — profits generated on investments — would be taxed at the appropriate marginal rate and 50% of the gain for corporates, translating into an effective maximum rate of 10,5% for individuals and 15% for companies.
The primary residence would be exempt from CGT up to a maximum of R1-million rand over and above the price originally paid for the house. — I-Net Bridge