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Income Tax and Estate Planning
n The estate planner needs to evaluate the impact of income tax on his estate
plan, and it is advisable for him to consult with his professional adviser for
further information on this.
Capital Gains Tax: General
n Capital gains tax was implemented on 1 October 2001.
n It is triggered by the disposal on or after valuation date of any asset of a
South African resident, irrespective of where in the world the asset is held,
and certain assets of a non-resident.
n Assets include property of whatever nature, whether movable or immovable,
corporeal or incorporeal, except for currency (with the exception of gold and
platinum coins).
n A capital gain or loss is determined by calculating the difference between
the proceeds i.e. the amount accruing to the seller and the base cost of the
disposed asset.
n Base cost relates to the costs directly incurred in acquiring or improving the
asset.
n The Income Tax Act has set out certain valuation rules and methods of
calculation of the base cost. Due to limitations in scope of this guide, a
comprehensive discussion on all aspects of capital gains tax, including
valuation rules, is not possible, and the estate planner is advised to consult
with his adviser for more detail.
n Certain assets are excluded, such as personal use assets (see below for list
of assets excluded from a deceased estate).
n The first R2 million of the capital gain or loss incurred on the disposal of
a primary residence is excluded from capital gains tax (applies to a South
African resident and a natural person or Special Trust Type A, which owns
property as a primary residence).
n Once the taxable capital gain is calculated, it is included in taxable income
and taxed at normal income tax rates applicable.

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