What is the time of disposal (for CGT purposes) when a property is sold?
12 August 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: I have a
client who has sold a property. The deed of sale was signed in November 2014
subject to certain conditions (the sale of the purchaser’s own home), which
were met on the 15th February 2015. The property was transferred to the new
owners on the 15th May 2015 as per the Deeds Office.
Am I correct that the transaction falls into the 2015 tax
year as the conditions were met before the end of the tax year? Or does the
transaction only get taken into account in the tax year in which the transfer
is noted in the Deeds office, i.e. 2016?
A: The relevant
law is found in paragraph 13(1) of the Eighth Schedule to the Income Tax Act.
It reads as follows:
The time of disposal of an asset by means of—
(a) a change of ownership effected or to be effected from
one person to another because of an event, act, forbearance or by the operation
of law is, in the case of—
an agreement subject to a suspensive condition,
the date on which the condition is satisfied;
any agreement which is not subject to a
suspensive condition, the date on which the agreement is concluded;
Judge Wallis, in the recent CSARS v Bosch, said:
"A suspensive condition is one that suspends the exigible
content of a contract, either in whole or in part, pending the occurrence of an
uncertain future event.”
If the "certain conditions” constituted a suspensive
condition and were met before the end of the year of assessment (in other words
the condition was satisfied), the time of the disposal will be in the 2015
year. The registration in the deeds
office is not a suspensive condition.
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.