Income Tax Act, 1962 (Act No. 58 of 1962)SchedulesEighth Schedule : Determination of Taxable Capital Gains and Assessed Capital Losses (Section 26A)Part VII : Primary Residence Exclusion |
44. Definitions
In this Part, unless the context otherwise indicates—
"an interest"
means—
| (a) | any real or statutory right; or |
| (b) | a share owned directly in a share block company as defined in the Share Blocks Control Act or a share or interest in a similar entity which is not a resident; or |
[Paragraph (b) substituted by section 89 of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]
| (c) | a right of use or occupation, |
but excluding—
| (i) | a right under a mortgage bond; or |
| (ii) | a right or interest of whatever nature in a trust or an asset of a trust, other than a right of a lessee who is not a connected person in relation to that trust; |
[Words following paragraph (c) substituted by section 92(1)(a) of the Second Revenue Laws Amendment Act, 2001 (Act No. 60 of 2001)]
"primary residence"
means a residence—
| (a) | in which a natural person or a special trust holds an interest; and |
| (b) | which that person or a beneficiary of that special trust or a spouse of that person or beneficiary— |
[Words preceding paragraph (b)(i) substituted by section 92(1)(b) of the Second Revenue Laws Amendment Act, 2001 (Act No. 60 of 2001)]
| (i) | ordinarily resides or resided in as his or her main residence; and |
(ii) uses or used mainly for domestic purposes;
"residence"
means any structure, including a boat, caravan or mobile home, which is used as a place of residence by a natural person, together with any appurtenance belonging thereto and enjoyed therewith.
45. General principle
| (1) | Subject to subparagraphs (2), (3) and (4), a natural person or a special trust must, when determining an aggregate capital gain or aggregate capital loss, disregard— |
| (a) | so much of a capital gain or capital loss determined in respect of the disposal of the primary residence of that person or that special trust as does not exceed R2 million; or |
[Paragraph 45(1)(a) of the Eighth Schedule substituted by section 10(1) of Act No. 13 of 2012 - deemed to have come into operation on 1 March 2012)
| (b) | a capital gain determined in respect of the disposal of the primary residence of that person or that special trust if the proceeds from the disposal of that primary residence do not exceed R2 million. |
[Paragraph 45(1)(b) of the Eighth Schedule substituted by section 103(1) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010)]
(1A)
| (a) | The Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, that, with effect from a date or dates mentioned in that announcement, the amount of the capital gain or capital loss determined in terms of subparagraph (1)(a) or the amount of the capital gain determined in terms of subparagraph (1)(b) will be altered to the extent mentioned in the announcement. |
| (b) | If the Minister makes an announcement of an alteration contemplated in paragraph (a), that alteration comes into effect on the date or dates determined by the Minister in that announcement and continues to apply for a period of 12 months from that date or those dates subject to Parliament passing legislation giving effect to that announcement within that period of 12 months. |
[Paragraph 45(1A) of the Eighth Schedule inserted by section 81 of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2019), GG 42172, dated 17 January 2019]
| (2) | Where more than one natural person or special trust jointly holds an interest in a primary residence at the same time, the amount to be disregarded in terms of subparagraph (1) must be apportioned in relation to each interest so held. |
[Paragraph 45(2) substituted by section 29(1) of the Revenue Laws Amendment Act, 2001 (Act No. 19 of 2001) - effective 1 October 2001]
| (3) | Subject to paragraph 48, only one residence may be a primary residence of a person or a special trust for any period during which that person or special trust held an interest in more than one residence. |
| (4) | Subparagraph (1)(b) does not apply where a natural person or a special trust disposes of an interest in a residence which is or was a primary residence, and that person or a beneficiary of that special trust or a spouse of that person or beneficiary— |
| (a) | was not ordinarily resident in that residence throughout the period commencing on or after the valuation date during which that person or special trust held that interest; or |
| (b) | used that residence or a part thereof for the purposes of carrying on a trade for any portion of the period commencing on or after the valuation date during which that person or special trust held that interest. |
[Paragraph 45(4) of the Eighth Schedule inserted by section 73(1)(b) of the Taxation Laws Amendment Act, 2009 (Act No. 17 of 2009)]
| 46. | Size of residential property qualifying for exclusion |
Where a primary residence and the land on which it is situated is disposed of by a person, the provisions of paragraph 45 apply in respect of so much of that land, including unconsolidated adjacent land, as—
| (a) | does not exceed two hectares; |
| (b) | is used mainly for domestic or private purposes together with that residence; and |
[Paragraph 46(b) substituted by section 30(1) of the Revenue Laws Amendment Act, 2001 (Act No. 19 of 2001) - effective 1 October 2001]
| (c) | is disposed of at the same time and to the same person as that residence. |
| 47. | Apportionment in respect of periods where not ordinarily resident |
Subject to paragraphs 48, where—
| (a) | a natural person or special trust disposes of an interest in a residence which is or was a primary residence; and |
| (b) | that person or a beneficiary of that special trust or a spouse of that person or beneficiary, was not ordinarily resident in that residence throughout the period on or after the valuation date during which that person or special trust held that interest, |
[Paragraph 47(b) of the Eighth Schedule substituted by section 94(1) of the Second Revenue Laws Amendment Act, 2001 (Act No. 60 of 2001)]
then paragraph 45(1)(a) must apply only in respect of the portion of the capital gain or capital loss on disposal of the primary residence that is attributable to any period on or after the valuation date during which that person, beneficiary or spouse was so ordinarily resident.
[Words following paragraph 47(b) of the Eighth Schedule substituted by section 73 of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016)]
48. Disposal and acquisition of primary residence
A natural person or a beneficiary of a special trust or a spouse of that person or beneficiary must for purposes of paragraph 47 be treated as having been ordinarily resident in a residence for a continuous period (not exceeding two years), if that natural person, beneficiary or spouse did not reside in that residence during that period for any of the following reasons—
| (a) | at the time the residence was the primary residence of that natural person or special trust it had been offered for sale and vacated due to the acquisition or intended acquisition of a new primary residence; |
| (b) | that residence was being erected on land acquired for that purpose in order to be used as the primary residence of that natural person or special trust; |
| (c) | the residence had been accidentally rendered uninhabitable; or |
| (d) | the death of that natural person, beneficiary or spouse. |
[Paragraph 48 of the Eighth Schedule substituted by section 45 of the Taxation Laws Amendment Act, 2021 (Act No. 20 of 2021), Notice No. 770, GG45787, dated 19 January 2022]
49. Non-residential use
Subject to paragraph 50—
(a) where a natural person or special trust—
| (i) | disposes of an interest in a primary residence; or |
| (ii) | disposes of an interest in a residence that was a primary residence for a part of the period on or after the valuation date during which that person or special trust held that interest; and |
[Paragraph 49(a)(ii) of the Eighth Schedule substituted by section 95(1)(a) of the Second Revenue Laws Amendment Act, 2001 (Act No. 60 of 2001)]
| (b) | where that natural person, a beneficiary of that special trust or a spouse of that natural person or beneficiary used the residence referred to in subparagraph (a) or a part thereof for the purposes of carrying on a trade for any portion of the period on or after the valuation date during which that person or special trust held that interest, |
[Paragraph 49(b) of the Eighth Schedule substituted by section 46 of the Taxation Laws Amendment Act, 2021 (Act No. 20 of 2021), Notice No. 770, GG45787, dated 19 January 2022]
then paragraph 45(1)(a) must apply only in respect of the portion of the capital gain or capital loss on disposal of the primary residence that is attributable to any period on or after the valuation date during which that person, beneficiary or spouse used that residence for domestic purposes as well as to the part of that residence used by that person, spouse or beneficiary mainly for purposes other than the carrying on of a trade.
[Words following paragraph 49(b) of the Eighth Schedule substituted by section 74 of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016)]
50. Rental periods
A natural person or a beneficiary of a special trust or a spouse of that person or beneficiary must for purposes of paragraph 49 be treated as having used a residence for domestic purposes during any continuous period of absence therefrom (not exceeding five years) while that residence was being let, if—
| (a) | that person or beneficiary or spouse resided in that residence as a primary residence for a continuous period of at least one year prior to and after any such period; |
| (b) | no other residence was treated as the primary residence of that person or beneficiary of a special trust during any such period; and |
[Paragraph 50(b) of the Eighth Schedule substituted by section 75 of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016)]
| (c) | that person or beneficiary or spouse was— |
| (i) | temporarily absent from the Republic; or |
| (ii) | employed or engaged in carrying on business in the Republic at a location further than 250 kilometers from that residence. |
51. Transfer of residence from company or trust
| (1) | Where an interest in a residence has been transferred from a company or a trust to a natural person as contemplated in subparagraph (2)— |
| (a) | that company or trust must be deemed to have disposed of that interest for an amount equal to the base cost of that interest on the date of transfer thereof; |
| (b) | that company or trust and that natural person must, for purposes of determining any capital gain or capital loss in respect of the transfer of that interest, be deemed to be one and the same person with respect to— |
| (i) | the date of acquisition of that interest by that company or trust and the amount and date of incurral by that company or trust of any expenditure in respect of that interest allowable in terms of paragraph 20; and |
| (ii) | any valuation of that interest effected by that company or trust as contemplated in paragraph 29(4); |
| (c) | no allowance or deduction allowed to that company or trust in respect of that interest must be recovered or recouped by that company or trust or be included in the income of that company or trust in the year in which the transfer takes place; and |
[Paragraph 51(1)(c) of the Eighth Schedule substituted by section 104(1)(a) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010)]
| (d) | that company or trust and that natural person must be deemed to be one and the same person for purposes of determining the amount of any allowance or deduction that is to be recovered or recouped by or included in the income of that natural person in respect of that interest. |
[Paragraph 51(1)d) of the Eighth Schedule substituted by section 104(1)(a) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010)]
(2) Subparagraph (1) applies where—
| (a) | that natural person acquires that interest from the company or trust no later than 30 September 2010; |
[Paragraph 51(2)(a) of the Eighth Schedule substituted by section 104(1)(b) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010)]
| (b) | that natural person— |
| (i) | alone or together with his or her spouse directly held all the share capital or members’ interest in that company from 11 February 2009 to the date of registration in the deeds registry of that residence in the name of that natural person or his or her spouse or in their names jointly; or |
| (ii) | disposed of that residence to that trust by way of donation, settlement or other disposition or financed all the expenditure, as contemplated in paragraph 20, actually incurred by the trust to acquire and to improve the residence; and |
[Paragraph 51(2)(b) of the Eighth Schedule substituted by section 104(1)(c) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010)]
| (c) | that natural person alone or together with his or her spouse personally and ordinarily resided in that residence and used it mainly for domestic purposes as his or her or their ordinary residence from 11 February 2009 to the date of the registration contemplated in item (b)(i): |
[Paragraph 51(2)(c) of the Eighth Schedule substituted by section 104(1)(d) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010)]
| (d) | [Paragraph 51(2)(d) of the Eighth Schedule substituted by section 104(1)(e) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010)] |
Provided that this paragraph applies only in respect of the portion of the property contemplated in paragraph 46.
[Paragraph 51 of the Eighth Schedule substituted by section 74(1) of the Taxation Laws Amendment Act, 2009 (Act No. 17 of 2009)]
| 51A. | Disposal of residence by company or trust and liquidation, winding up, deregistration or termination of company or trust |
[Heading of paragraph 51A of the Eighth Schedule substituted by section 113(1)(a) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective 1 October 2010]
| (1) | Subject to subparagraph (6), this paragraph applies where a company or trust disposes of an interest in a residence and— |
| (a) | the disposal takes place on or before 31 December 2012; |
| (b) | the residence to which that interest relates is mainly used for domestic purposes during the period commencing on 11 February 2009 and ending on the date of the disposal contemplated in item (a) by one or more natural persons who are connected persons in relation to the company or trust at the time of that disposal; and |
[Paragraph 51A(1)(b) of the Eighth Schedule substituted by section 113(1)(b) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011)) - effective 1 October 2010]
| (c) | [Paragraph 51A(1)(c) of the Eighth Schedule deleted by section 113(1)(c) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective 1 October 2010]; |
| (d) | within a period of six months commencing on the date of the disposal contemplated in item (a)— |
| (i) | in the case of a company making the disposal, that company has taken steps to liquidate, wind up or deregister as contemplated in section 41(4); or |
| (ii) | in the case of a trust making the disposal, steps have been taken to terminate the trust. |
(Paragraph 51A(1)(d)(ii) of the Eighth Schedule substituted by section 113(1)(d) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective from 1 October 2010]
| (2) | Where a company or a trust makes a disposal of an interest in a residence as contemplated in subparagraph (1), that company or trust must be deemed to have made that disposal for an amount equal to the base cost of that interest as at the date of that disposal. |
(3) Where—
| (a) | an interest in a residence has been acquired by a person as a result of a disposal by a company of that interest to that person as contemplated in subparagraph (1); |
| (b) | that person (together with all other persons holding shares in that company) acquired all the shares in the company subsequent to the date of acquisition by the company of that interest; and |
| (c) | 90 per cent or more of the market value of the assets held by the company during the period commencing on 11 February 2009 and ending on the date of the disposal contemplated in subparagraph (1)(a) is attributable to that interest, |
that person must—
| (i) | disregard the disposal of all shares held by that person in that company for purposes of determining his or her taxable income, assessed loss, aggregate capital gain or aggregate capital loss if that disposal is made in anticipation of or in the course of the liquidation, winding up or deregistration of that company; and |
| (ii) | be deemed to have acquired that interest at a cost equal to the base cost of the shares contemplated in subitem (i) as at the date of the acquisition by the person of those shares plus the cost of any improvements effected in respect of that interest subsequent to that date of acquisition. |
[Paragraph 51A(3)(c)(ii) of the Eighth Schedule substituted by section 113(1)(e) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective 1 October 2010]
| (4) | Where an interest in a residence has been acquired by a person as a result of a disposal by a company of that interest to that person as contemplated in subparagraph (1) and where subparagraph (3) does not apply— |
| (a) | that person must disregard the disposal of any share in that company for purposes of determining his or her taxable income, assessed loss, aggregate capital gain or aggregate capital loss if that disposal is made in anticipation of or in the course of the liquidation, winding up or deregistration of that company; and |
| (b) | that person and that company must be deemed to be one and the same person with respect to— |
| (i) | the date of acquisition of that interest by that company; |
| (ii) | the amount and date of incurral by that company of any expenditure in respect of that interest allowable in terms of paragraph 20; and |
| (iii) | any valuation of that interest effected by that company as contemplated in paragraph 29(4). |
[Paragraph 51A(4)(b)(iii) of the Eighth Schedule substituted by section 113(1)(f) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective 1 October 2010]
| (5) | Where an interest in a residence has been acquired by a person as a result of a disposal by a trust of that interest to that person as contemplated in subparagraph (1), that person and that trust must for purposes of determining any capital gain or capital loss in respect of the disposal by that person of that interest so acquired be deemed to be one and the same person with respect to— |
| (a) | the date of acquisition of that interest by that trust; |
| (b) | the amount and date of incurral by that trust of any expenditure in respect of that interest allowable in terms of paragraph 20; and |
| (c) | any valuation of that interest effected by that trust as contemplated in paragraph 29(4). |
| (6) | This paragraph does not apply to any disposal made to a person unless— |
(Words preceding paragraph 51A(6)(a) of the Eighth Schedule substituted by section 113(1)(g) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective 1 October 2010]
| (a) | within a period of six months commencing on the date of that disposal— |
| (i) | where that person is a company, that company has taken steps to liquidate, wind up or deregister as contemplated in section 41(4); or |
| (ii) | where that person is a trust, steps have been taken to terminate the trust. |
[Paragraph 51A(6)(a)(ii) of the Eighth Schedule substituted by section 113(1)(h) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective 1 October 2010]
| (b) | one or more natural persons contemplated in subparagraph (1)(b) acquire the residence contemplated in that subparagraph on or before 31 December 2012. |
| (7) | [Paragraph 51A(7) of the Eighth Schedule deleted by section 113(1)(i) of the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011) - effective 1 April 2012]. |
[Paragraph 51A of the Eighth Schedule inserted by section 105(1) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010)]