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The tax implications of a windfall

Thursday, 30 April 2015   (0 Comments)
Posted by: Author: Ingé Lamprecht
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Author: Ingé Lamprecht (Moneyweb)

How prize money is treated.

Unexpectedly receiving a large sum of money can go a long way in easing some financial pressure or building a nest egg, but often the situation can look very different after the taxman took his cut of the pie.

In this article, Wessel Smit, director at The Core Group, explains the tax implications of three windfalls for individuals.

1. Winning R5 million in the National Lottery

Smit says National Lottery winnings are generally regarded as capital in nature and not included in the taxable income of the individual.

"Therefore it will not be subject to normal tax in South Africa.”

It is also excluded from capital gains tax (CGT).

However, the individual would need to declare the winnings to the South African Revenue Service (Sars).

Smit says when the individual completes his tax return he needs to state that he received a non-taxable amount during the tax year. This would activate a section in the tax return where the amount can be declared, although it won’t be taxed.

Please click here to read full article.

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