Taxes

Finweek English Edition - - INVEST DIY -

ever y year is ta x-f ree, so you only pay CGT on any cap­i­tal gains above R30 000. This R30 000 t a x-f ree amount is across all as­sets, so if you made a cap­i­tal gain else­where that would have to be i ncluded i n your cap­i­tal gains amount for tax pur­poses.

An­other im­por­tant point is that CGT came into ex­is­tence on 1 Oc­to­ber 2001, so if you bought a share be­fore that date you would use the 1 Oc­to­ber 2001 price as your ef­fec­tive pur­chase price for any CGT. Your bro­ker will have this price read­ily avail­able.

If you are a trader as def ined by Sars (t rans­act­ing i n de­riv­a­tives or hold­ing less than three years), then it de­fines any prof­its as rev­enue, and your ef­fec­tive rate of tax on your gains is your mar­ginal rate.

If trad­ing is def ined as rev­enue, you can deduct all ex­penses from your in­come (prof it). So bro­ker­age fees, data fees, mag­a­zine sub­scrip­tions and the l ike are all de­ducted from your prof­its be­fore declar­ing a profit for tax pur­poses. You are also able to deduct all los­ing trades from your prof­its so at the end of the day you pay the tax on your ul­ti­mate prof­its, not profit per trade.

You can also claim ex­penses pro rata. For ex­am­ple, i f you use your com­puter half the time for trad­ing and the other half for per­sonal use you can claim half of the costs as a trad­ing ex­pense.

A l ast point is to keep ex­cel­lent records. Your bro­ker will pro­vide CGT and profit/ loss re­ports, but ul­ti­mately doc­u­ments, proof of prof­its and costs are your re­spon­si­bil­ity. I would also sug­gest us­ing sep­a­rate ac­counts for your trad­ing and in­vest­ing ac­tiv­i­ties. Your bro­ker should be able to of­fer this func­tion at no ex­tra cost and it will help keep your tax li­a­bil­i­ties clean and easy to iden­tify.

Nh­lanhla Nene

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