Capital Gains Tax in South Africa: A Simple Overview

By / September 19, 2025

Capital Gains Tax (CGT) is one of those topics that sounds intimidating until you see how the rules fit together. […]

Capital Gains Tax in South Africa A Simple Overview

Capital Gains Tax (CGT) is one of those topics that sounds intimidating until you see how the rules fit together. This guide explains CGT in plain language, shows you how to work out a gain step-by-step, and flags the most useful exclusions and reliefs available to South African taxpayers in the 2025 tax year. Where possible, we have included quick examples so you can see exactly how the maths works in real life.

What is Capital Gains Tax?

CGT is not a separate tax. It forms part of your normal income tax. When you dispose of a capital asset for more than its base cost, the capital gain is included in your taxable income at a set inclusion rate. Your normal tax rate is then applied to that portion. If you sell for less than base cost, you may have a capital loss which can reduce current or future capital gains (but not your salary or other ordinary income).

Typical capital assets

  • Property (primary residence, rental properties, plots)
  • Shares and unit trusts
  • Crypto assets
  • Businesses and business assets
  • Collectables and certain high-value personal assets

When does CGT apply? (What counts as a “disposal”?)

CGT is triggered when you dispose of an asset. That includes:

  • A sale for cash or on credit
  • A donation or gift
  • An exchange or part-exchange
  • Loss or destruction (for example, insurance payout after a fire)
  • Deemed disposals, notably:
    • Death (your estate is treated as if it disposed of most assets at market value)
    • Ceasing South African tax residency (often called exit tax)

There are important roll-overs and exclusions for some of these events (more below).

Key exclusions and reliefs

Several exclusions prevent everyday transactions from creating an administrative nightmare. The most important are:

  • Annual exclusion (individuals and special trusts): The first R40,000 of capital gains (or losses) each tax year is ignored. In the year of death, the exclusion increases to R300,000.
  • Primary residence exclusion: Up to R2 million of the capital gain or loss on the disposal of your primary residence can be disregarded. Separately, if total proceeds from selling a primary residence do not exceed R2 million, the entire gain or loss is disregarded.
    Notes:
    • The land must generally not exceed two hectares used for domestic purposes.
    • If you used part of the home for trade (for example, a home office or letting a cottage), you must apportion the gain and the exclusion.
    • Periods you were physically absent for certain reasons (for example, building, employment transfers) can sometimes still count as periods of ordinary residence.
  • Personal-use assets (individuals and special trusts): Most items used mainly for non-trade purposes fall outside CGT (for example, your personal car, furniture, clothing). Losses on personal-use assets are also disregarded.
  • Retirement benefits and certain insurance policies: Generally excluded from CGT.
  • Small business relief (lifetime, subject to conditions): Individuals 55 or older (or permanently disabled) may qualify for a once-off R1.8 million CGT exclusion on disposing of small business assets or an interest in a small business where the business’s market value does not exceed R10 million. There are qualifying ownership and “active business asset” requirements, so obtain professional advice before relying on this relief.

Inclusion rates and maximum effective tax rates

CGT works by including part of your net capital gain in your taxable income. The percentage included depends on who you are:

Taxpayer typeInclusion rateMaximum effective CGT rate*
Individuals & special trusts40%18.0%
Companies80%21.6%
Other trusts (ordinary trusts)80%36.0%

* The “maximum effective rate” is the inclusion rate multiplied by the top marginal rate that applies to that taxpayer (for example, 40% × 45% = 18% for individuals at the top bracket; 80% × 27% = 21.6% for companies).

The five-step method to calculate a capital gain

  1. Identify the disposal and proceeds
    Take the amount you received or accrued (normally the selling price). If you sold below market value to a connected person, SARS may substitute market value.
  2. Determine the base cost
    Base cost typically includes:
    • Purchase price
    • Direct acquisition costs (for example, transfer duty, securities transfer tax, VAT where not claimed, legal fees, broker charges)
    • Costs of improvements or additions that are still reflected in the asset at disposal
    • Certain selling costs (for example, agent commission, advertising, legal fees on sale)
      Note: Normal repairs and maintenance are generally not capital; they are revenue expenses and do not form part of base cost for CGT.
  3. Calculate the capital gain or loss
    Proceeds – Base cost = Capital gain (or loss)
  4. Apply exclusions and roll-overs
    • Annual exclusion (R40,000; or R300,000 in year of death)
    • Primary residence exclusion (up to R2 million; or the full gain if proceeds ≤ R2 million)
    • Personal-use asset rules, small business relief, and any valid roll-over (for example, spouse roll-over, involuntary disposal replacement relief)
  5. Apply the inclusion rate
    The resulting net capital gain is multiplied by the inclusion rate and included in taxable income. Your normal tax rates (or company rate) then determine the final tax.

Valuation date and older assets (1 October 2001)

CGT started in South Africa on 1 October 2001 (the valuation date). If you acquired an asset before that date, you do not pay CGT on gains that accrued up to then. To separate pre-2001 and post-2001 growth, SARS allows specific methods, commonly:

  • Market value on 1 October 2001 (if you obtained or can substantiate it)
  • Time-apportionment (spreads the total gain across the pre- and post-2001 periods)
  • 20% of proceeds method (certain cases)

You then add post-valuation improvements and allowable costs to arrive at base cost.

Identical shares and units: which ones did you sell?

For identical assets (for example, multiple tranches of the same listed share), you may use specific identification if you can prove which parcel you sold. If you cannot, SARS requires you to use first-in-first-out (FIFO) to match disposals to earlier acquisitions. Keep broker statements and trade confirmations to support your method.

Primary residence: the big practical points

  1. R2 million of gain or loss can be disregarded on a primary residence.
  2. If the proceeds are R2 million or less, you disregard the full gain or loss, but the rule will not apply where there was any trade use after 1 October 2001.
  3. Where there was partial trade use (for example, you used one room exclusively as a home office, or you let out the granny flat), you apportion proceeds, base cost, and the exclusion between private and trade portions.
  4. The two-hectare limit generally applies to land used for domestic purposes as part of the primary residence.
  5. Periods of absence prescribed by the law (for example, while building, or where you were obliged to live elsewhere for work) can be treated as if you ordinarily resided in the home, subject to conditions and time limits.

Exit tax and death: deemed disposals

  • Ceasing tax residency: Most worldwide assets (except South African immovable property and certain others) are treated as disposed of at market value the day before you cease residency. This creates a CGT event even though you did not sell anything.
  • Death: A deceased person is generally treated as having disposed of assets at market value to the estate on the date of death. However, there is a roll-over for assets passing to a resident surviving spouse (the gain is deferred and the spouse “steps into your shoes” at your base cost). The R300,000 annual exclusion applies in the year of death.

Because these events can produce large, once-off gains, planning ahead and keeping complete records is essential.

Roll-over reliefs that can defer CGT

  • Transfers between spouses (during life): In many cases, a disposal to your spouse qualifies for roll-over. The receiving spouse takes over your base cost and the date you acquired the asset. Donations between spouses are generally exempt from donations tax, but always check the conditions.
  • Involuntary disposals and replacement assets: If an asset is lost, destroyed, or expropriated and you acquire a suitable replacement asset within the allowed periods and “bring it into use”, some or all of the gain can be deferred.
  • Estate to surviving spouse: Assets that pass to a resident surviving spouse typically qualify for a roll-over until the spouse later disposes of the asset.

Each roll-over has detailed conditions and time limits. Document everything and obtain tax advice before relying on a deferral.

Worked examples

Example 1: Individual sells JSE shares

  • You bought 1,000 shares at R50 each. Dealing costs were R500.
  • You sell the 1,000 shares for R90 each. Dealing costs on sale are R700.
  • You have made no other disposals this year.

Proceeds: 1,000 × R90 = R90,000
Base cost: (1,000 × R50) + R500 + R700 = R51,200
Capital gain: R90,000 – R51,200 = R38,800

Apply the annual exclusion of R40,000: your net capital gain is effectively nil this year, so there is no CGT to pay. If you had additional gains that pushed the total above R40,000, only the excess would be considered.

Example 2: Selling a primary residence with a large gain

  • Bought for R1,800,000; allowable acquisition and improvement costs R200,000
  • Sell for R5,200,000; allowable selling costs R200,000
  • Entirely used as a private home; qualifies as your primary residence; land is within the two-hectare limit.

Proceeds: R5,200,000
Base cost: R1,800,000 + R200,000 + R200,000 = R2,200,000
Capital gain: R5,200,000 – R2,200,000 = R3,000,000
Primary residence exclusion: R2,000,000
Reduced gain: R3,000,000 – R2,000,000 = R1,000,000
Annual exclusion: R40,000 → R960,000 net capital gain
Inclusion (individuals 40%): 0.40 × R960,000 = R384,000 added to taxable income
Your actual tax depends on your marginal rate. If you were in the top bracket, the effective tax on the R1,000,000 post-exclusion gain would be up to 18%.

Example 3: Company disposes of an investment property

  • Company buys a small office unit for R2,000,000 plus costs R100,000
  • Sells a few years later for R2,900,000; selling costs R60,000

Proceeds: R2,900,000
Base cost: R2,000,000 + R100,000 + R60,000 = R2,160,000
Capital gain: R740,000
Inclusion (companies 80%): 0.80 × R740,000 = R592,000 added to taxable income
Corporate rate 27% → CGT component R159,840 (effective 21.6% of the R740,000 gain).

Example 4: Crypto asset disposal by an individual investor

  • You bought crypto for R120,000. You sell for R200,000 in the same tax year.
  • You are a long-term investor (not a trader); no other CGT events this year.

Capital gain: R200,000 – R120,000 = R80,000
Annual exclusion: R40,000 → R40,000 net capital gain
Inclusion (40%): 0.40 × R40,000 = R16,000 added to taxable income.
At a marginal rate of, say, 31%, tax on this portion is R4,960.

Important: If you are trading frequently, mining, or staking, SARS may treat some or all of your returns as revenue, not capital. In that case, normal income tax rates apply without the CGT annual exclusion.

How to report CGT on eFiling (ITR12)

  1. Open the capital gains section on your ITR12 (tick the relevant box in the return wizard).
  2. Capture each disposal: description, dates, proceeds, base cost, and any other required fields.
  3. Indicate special treatments where applicable (for example, primary residence, personal-use asset, small business exclusion).
  4. Upload supporting documents on request: sale agreements, broker notes, improvement invoices, valuations, and any calculations.
  5. Keep records for at least five years. For pre-2001 assets, keep valuation date evidence and time-apportionment workings.

Common mistakes to avoid

  • Forgetting selling costs like agent commission or broker fees in the base cost
  • Claiming repairs as capital improvements (repairs are revenue, not base cost)
  • Ignoring apportionment for homes with partial trade use or periods of non-residence
  • Treating personal-use losses (for example, on your private car) as deductible capital losses
  • Misclassifying crypto activity (investor versus trader)
  • Losing pre-2001 records that prove valuation date cost
  • Overlooking exit tax when ceasing tax residency
  • Missing the small business relief conditions (age, ownership period, active asset tests, value limits)

FAQs

Does CGT apply to my personal car or furniture?
Generally no. These are personal-use assets for individuals and special trusts, so gains and losses are disregarded.

What if I sell my primary residence for R2 million or less?
If proceeds are R2 million or less, the full capital gain or loss is disregarded (subject to the trade-use limitations).

My spouse and I are married in community of property. Who is taxed on the gain?
Where assets form part of the joint estate, the gain is usually split equally. Transfers between spouses often qualify for CGT roll-over, but the receiving spouse will inherit the transferor’s base cost and acquisition date.

I received an insurance payout after my business equipment was destroyed. Must I pay CGT now?
You may qualify for a replacement-asset roll-over if you reinvest the proceeds in a suitable replacement within the prescribed time and bring it into use. Keep evidence of dates and amounts.

How does CGT interact with wear-and-tear recoupments on business assets?
Where allowances were claimed, part of the gain may be a recoupment (taxed as ordinary income), with the balance potentially subject to CGT. The detailed mechanics depend on the asset and prior claims.

Practical record-keeping checklist

  • Acquisition documents: purchase price, transfer duty or STT, legal and broker fees
  • Improvement invoices: only improvements still reflected at disposal
  • Disposal documents: sale agreement, commission statements, legal fees
  • Valuation date evidence (pre-1 October 2001 assets): market value reports or data supporting time-apportionment
  • Crypto records: exchange statements, wallet logs, cost basis reports
  • Residency status paperwork: if you ceased SA tax residency, keep formal declarations and dates
  • Business relief proofs: age, ownership period, financial statements, asset-use evidence, market value of the business

Final word

South Africa’s CGT system is logical once you break it down into the five steps: proceeds, base cost, gain or loss, exclusions/roll-overs, and inclusion rate. The real work lies in accurate record-keeping and applying the correct reliefs. If your scenario involves multiple assets, cross-border moves, partial trade use of a home, or a potential small-business exit, a short consultation with a tax practitioner can save significant time and money.

Sources

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