The Concept Of ‘disposal’ For The Purposes Of Capital Gains Tax In South Africa
Liability for capital gains tax is determined in terms of the Eighth Schedule to the Income Tax Act 58 of 1962.According to the Eighth chedule, the disposal of an asset is the event that triggers the liability for capital gains tax.It is therefore imperative to know what constitutes a disposal, because it is fundamental to the entire capital gains tax regime.The purpose of this paper is to analyse the definition of a disposal in order to ascertain whether a disposal, as defined, is intended to mean a transfer of ownership in an asset or whether a disposal could take place upon the occurrence of events or causae other than the transfer of ownership.
A study of relevant literature was undertaken to analyse the definition of "disposal” in order to fully comprehend the intention and meaning of the term as it is contemplated in the Eighth Schedule.The current definition of a "disposal” could lead to uncertainty and anomalies.It is therefore recommended that the legislature should amend the definition of a disposal in the Eighth Schedule.The definition should refer to the disposal of an asset (other than a personal-use asset) as being the transfer of ownership of an asset from one person to another or the loss of the ownership of an asset.Because the common law has clear principles regarding how ownership of different classes of assets is transferred, no confusion would arise regarding whether or when a disposal has occurred.
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.