Q: My client is changing his primary residence into sub title property. He is
building a house on the property, next to his primary residence. What is the
CGT implication for selling both houses?
A: On subdivision of the land there is no disposal
event (See also pg. 77 of SARS CGT Guide issue 4) and this will merely result
in two assets being held by the person. In our view the subdivided land to be
developed for sale does not form part of the "primary residence” anymore as
defined in para 45 Eighth Schedule of the Income Tax Act as a "residence”
requires a structure or building used for domestic purposes by the person
having the interest therein (i.e. owner). In our view the subdivided land
developed for sale or realisation will not fall within the primary residence
exclusion and any capital gain will be fully taxable.
Please click here to access a SARS ruling which addresses
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.