National Budget 2016/17

The following announcements can and will impact real estate transactions as from 1 March 2016:

As summarised by

Pam Snyman of REDZetc

Real Estate Real Experts

  1. Capital Gains Tax (CGT)

The inclusion rate in respect of Capital Gains Tax for individuals and special trusts* (see definition below) increased from 33.3% to 40%, and for legal entities and other trusts from 66.6% to 80%. This means that the maximum effective rates are the following:

  • Individuals/special trusts*: 16.4%
  • Companies: 22.4%
  • Other Trusts: 32.8%.

 

* For tax purposes the following types of special trusts are recognised:

  • Special Type A – a trust created only for the benefit of a person(s) with a “disability”, as defined in section 6B(1), where the disability makes it impossible for the person(s) from earning enough money for their care or from managing their own financial matters.
  • Special Type B – a trust created only for the benefit of a person(s) who are relatives of the person who died and who are alive on the date of death of that deceased person (including those conceived but not yet born), and the youngest of the beneficiaries are younger than 18 years on the last day of the year of assessment.
  1. Transfer Duty

An additional band of Transfer Duty of 13% has been introduced for acquisitions above R10,000,000 for property acquired on or after 1 March 2016

  1. Loans to Trusts
  • Interest-free loans to trusts are to be treated as donations.
  • **Donations tax is payable at a flat rate of 20% on the value of property disposed of by a donation (sections 54 to 64 of the Income Tax Act, 1962). A donation includes property disposed of for an inadequate consideration (section 58)
  • Assets transferred through a loan to a trust are to be included in the estate of the founder at death.

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