Capital Gains Tax in South Africa: How It Works

Capital Gains Tax (CGT) in South Africa runs through the income tax system via the Eighth Schedule to the Income Tax Act. For the 2024/2025 tax year, individual taxpayers receive an annual exclusion of R40,000 and an inclusion rate of 40% - only 40% of the net capital gain above the exclusion enters taxable income and is taxed at the normal marginal rate (SARS: Capital Gains Tax, 2024).

Key Takeaways

Annual exclusion for individuals: R40,000 (2024/2025); R300,000 in the year of death.

Inclusion rate: 40% for individuals - only 40% of the net gain enters taxable income.

Primary residence exclusion: up to R2 million of any capital gain on your main home.

Every disposal triggers CGT - including donations, crypto swaps, and death.

What triggers CGT?

CGT arises on a “disposal” - any event that changes, or is deemed to change, ownership of a capital asset (Eighth Schedule, Income Tax Act 58 of 1962). Disposals include:

Selling an asset: property, shares, or a business interest.
Donating an asset - deemed disposed of at market value on the date of the donation.
Converting, surrendering, or abandoning an asset.
Death - all assets are treated as disposed of at market value on the date of death.
Exchanging one crypto asset for another (each swap is a disposal of the original asset).

Not all assets trigger CGT. For the 2024/2025 tax year, personal-use assets - a private vehicle, household furniture, or a boat used mainly for personal purposes - are excluded if disposal proceeds are below R69,000 (SARS: Capital Gains Tax). Check the current threshold before each tax year as it may change.

How is the taxable gain calculated?

The four-step calculation applies to every disposal:

Step 1 - Gross capital gain: Proceeds minus the base cost of the asset. The base cost includes the original purchase price, improvement costs, and certain acquisition costs such as transfer duty, conveyancing fees, or brokerage commissions.

Step 2 - Annual exclusion: For the 2024/2025 tax year, the first R40,000 of net capital gains for the year is excluded. In the year of death, the exclusion rises to R300,000.

Step 3 - Inclusion rate: For individuals, 40% of the remaining net capital gain (after the exclusion) is included in taxable income. Companies and trusts have higher inclusion rates.

Step 4 - Marginal rate tax: The included amount is added to your other taxable income and taxed at your normal marginal income tax rate. For high earners, the effective CGT rate is 40% × 45% = 18%.

Primary residence exclusion

A capital gain on the sale of your primary home may be partially or fully excluded from CGT. The exclusion is up to R2 million of any capital gain on a residence that qualifies as your primary residence and was used mainly for domestic purposes (SARS: Primary Residence Exclusion).

The exclusion reduces proportionally if:

Only part of the property was used as a primary residence (e.g., you rented out a portion).
You owned the residence through a company or trust rather than in your personal name.
The residence was not your primary home for the full period of ownership.

What happens if you make a capital loss?

Capital losses in a year offset capital gains in the same year. If total losses exceed gains, the net loss carries forward to future years and reduces future capital gains. Capital losses cannot be offset against ordinary income - they can only reduce capital gains.

Keep a running total of carry-forward losses - the balance reduces your CGT bill directly when you sell an asset with a large gain in a later year.

What records do you need for a CGT claim?

Original purchase agreement and proof of purchase price.
Records of all improvement costs: invoices and proof of payment.
Sale agreement and transfer documents.
Brokerage or exchange statements for share disposals.
Records of any apportionments made where a property had mixed use.

Keep records for at least five years from the date of filing the return that included the gain (SARS record-keeping).

Common mistakes

Not accounting for CGT on donations. A donation is a disposal at market value - even if no money changes hands. The capital gain is calculated based on the market value at the date of the donation, not the actual proceeds.

Forgetting share sale gains. Every share or unit trust disposal must be reported on the ITR12. Most brokerage platforms issue annual CGT summaries - use those to cross-check your records before filing.

Not tracking cost bases over time. If you bought shares in multiple lots at different prices, the base cost of each lot must be tracked separately. If you can’t substantiate the purchase price, SARS defaults to a zero base cost - which overstates your taxable gain.

Assuming the primary home exclusion always applies in full. Partial use for business, non-direct ownership, or periods of non-occupation can all reduce the R2 million exclusion.

Frequently Asked Questions

Does Capital Gains Tax apply when I sell my home?

If the property is your primary residence used mainly for domestic purposes, an exclusion of up to R2 million of any capital gain may apply. If only part of the property was used as a primary residence - for example, if you rented out a room or ran a business from it - the R2 million exclusion is reduced proportionally. Gains above R2 million remain subject to CGT at the normal inclusion rate.

What is the inclusion rate for Capital Gains Tax for individuals?

For the 2024/2025 tax year, 40% of the net capital gain after the annual exclusion of R40,000 is included in taxable income. This included amount is then taxed at your normal marginal income tax rate. For a taxpayer on the maximum marginal rate of 45%, the effective CGT rate is 18% (40% × 45%).

Is donating an asset subject to Capital Gains Tax?

Yes. A donation is treated as a disposal at the market value of the asset on the date of the donation. The capital gain is the market value minus the base cost. Both the donor’s CGT position and any donations tax obligation (at 20% on amounts above R100,000 per year) need to be considered.

How do I calculate the base cost of shares bought over several years?

Track each purchase separately: date, number of shares, total rand cost including brokerage. When you sell, match the disposal to specific lots using a consistent method such as first-in, first-out (FIFO). Poor records can result in an overstated taxable gain because SARS defaults to a zero base cost if you cannot substantiate the purchase price.

Sources

SARS: Capital Gains Tax - official overview, exclusion amounts, inclusion rates, and primary residence rules
Income Tax Act 58 of 1962, Eighth Schedule - the complete legislative framework for CGT
SARS Comprehensive Guide to Capital Gains Tax - detailed guidance on base cost, exclusions, and special rules

This guide is for general educational purposes. CGT exclusions and rates are set annually - verify current figures at sars.gov.za before filing.