NO CGT ON RE­TAIL BONDS

Weekend Argus (Saturday Edition) - - PERSONAL FINANCE -

You are not li­able for cap­i­tal gains tax (CGT) on your in­vest­ments in ei­ther fixed-rate or in­fla­tion-linked RSA Re­tail Bonds, be­cause you earn only in­ter­est on these in­vest­ments, the Na­tional Trea­sury has con­firmed.

Con­fu­sion some­times arises for in­vestors over whether or not they are li­able for CGT be­cause of the ter­mi­nol­ogy used in re­la­tion to in­fla­tion-linked re­tail bonds. Your orig­i­nal in­vest­ment is re­ferred to as your “cap­i­tal” and this is ad­justed ev­ery six months in line with changes to the con­sumer price in­dex. The trea­sury has con­firmed that this in­crease is not con­sid­ered a cap­i­tal gain but a pay­ment of in­ter­est. In ad­di­tion, you earn in­ter­est, at the pre­vail­ing rate, on the ad­justed cap­i­tal amount.

For the 2009/10 tax year, you will pay tax once the to­tal in­ter­est from all your in­vest­ments ex­ceeds R21 000 a year if you are un­der 65 years of age or R30 000 if you are 65 years or older.

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