QUESTION FOUR

On 01 November 2019, Sarah Wrangler sold the primary residence that she and Joe had lived in for the amount of R3 750 000. Sarah was the sole owner of the property and had purchased it on 01 October 2010 for the amount of R1 900 000, Sarah improved the property at a cost of R300 000.

His employer had sent Joe overseas and Sarah and the children went with him. They were overseas from 1 December 2014 to 1 January 2019. Sarah had remained in the house (after their return and Joes subsequence death) until date of sale.

Whist Joe, Sarah and the children were overseas; they remained mainly resident in South Africa for tax purposes. They did during their absence; contemplate emigrating to the overseas country. In this regard, they put the house on the market for 8 months, starting 01 April 2019. Eventually they decided that they would ultimately like to return to South Africa and took the house off the market (i.e. did not sell)

Throughout their time overseas, the house was rented out. No deductions were claimed against the rental income.

Required:

Calculate and discuss the capital gain effects (after any specific exclusions) for Sarah on the sale of the house.

Assume that current tax rates apply for the foreseeable future.

Appendix: TAXATION TABLES AND RATES

INCOME TAX SMALL BUSINESS CORPORATIONS 2019le Income (R) Rate of Tax (R)

0 78 150 0% of taxable income

78 151 365 000 7% of taxable income above 78 150

365 001 550 000 20 080 + 21% of taxable income above 365 000

550 001 and above 58 930 + 28% of taxable income above 550 000

INCOME TAX SMALL BUSINESS CORPORATIONS 2018le Income (R) Rate of Tax (R)

0 75 750 0% of taxable income

75 751 365 000 7% of taxable income above 75 750

365 001 550 000 20 248 + 21% of taxable income above 365 000

550 001 and above 59 098 + 28% of taxable income above 550 000

TURNOVER TAX FOR MICRO BUSINESSES 2018/20192018te of tax (R)

0 335 000 0% of taxable turnover

335 001 500 000 1% of taxable turnover above 335 000

500 001 750 000 1 650 + 2% of taxable turnover above 500 000

750 001 and above 6 650 + 3% of taxable turnover above 750 000

INCOME TAX: INDIVIDUALS AND TRUSTS

TAX TABLES (Individuals)

For the year ended 28 February 2019

0 195 850 18% of income

195 851 305 850 35 253 + 26% of income above 195 850

305 851 423 300 63 853 + 31% of income above 305 850

423 301 555 600 100 263 + 36% of income above 423 300

555 601 708 310 147 891 + 39% of income above 555 600

708 311 1 500 000 207 448 + 41% of income above 708 310

1 500 001 and above 532 041 + 45% of taxable income above 1 500 000

For the year ended 28 February 2018

0 189 880 18% of income

189 881 296 540 34 178 + 26% of income above 189 880

296 541 410 460 59 314 + 31% of income above 296 540

410 461 555 600 93 135 + 36% of income above 410 460

555 601 708 310 149 619 + 39% of income above 555 600

708 311 1 500 000 209 032 + 41% of income above 708 310

1 500 001 and above 533 625 + 45% of taxable income above 1 500 000

REBATES Primary 65 and over	2019 R14 067 5 675	2018 R13 635 5 400
Secondary Rebate (Persons of 65 and older) Third Rebate (>75 years)	R 7 713 R 2 574	R 7 479 R 2 493
EXEMPT INCOME Limited to
Total interest exemption
including foreign interest
Below 65	R23 800	R23 800
65 and over	R34 500	R34 500

CAPITAL GAINS TAX (CGT) 2019 Year of Assessment

Inclusion rates

Individuals, special trusts and individual policyholder funds 33.3%

Other taxpayers 66.6%

Exclusions

Individuals (annual non-cumulative): R40 000

Individuals in year of death: R300 000

Primary residence exclusion on the disposal of a primary residence: R2million gain/loss

Small business assets (when a person is over age 55): R1.8 million

MEDICAL SCHEME CREDIT (monthly) 2019 2018

Main member R310 R303

Main member with one dependant R620 R606

Main member with two dependants R829 R810

Each additional dependant qualifies for a further rebate or credit of R209 (2018: R204) per month