Capital gains tax is normally paid on your profit when selling particular assets such as property, shares, unit trusts, exchange-traded funds, and gold coins. If you are buying and selling these assets on a regular basis, Sars may regard you as a trader. In these circumstances, your profits may become subject to income tax.
Nothing is certain except death and taxes. This famous quote about taxes originated with Benjamin Franklin in 1789 and is probably some of the truest words ever spoken. To put it simply, if you don’t want to pay CGT , it effectively means that you don’t want any growth on your investments, which wouldn’t make sense.
What often happens is that there is a fear of an increasing capital gains implication which leads to behaviour aimed only at postponing paying this tax. This inherently leads to poor financial decision-making by investors or no decision-making at all. To use a practical example, many investors have the mindset of not selling an asset because the CGT implication will be too big. When the asset’s price falls, the investor again does not want to sell for the reason that it is too cheap. But then the price of the asset recovers again, meaning that the CGT implication re-appears. You therefore become tied up in a circular argument leading to your decision to keep the share.
There are ways and products to reduce or better manage your tax situation when it comes to CGT and therefore one should not ignore the issue altogether. Here are some strategies or ideas to keep in mind:In conclusion, CGT should be your friend, not your enemy. Remember, the higher the CGT, the more money you made.