I bought my flat 7 years ago for R1 million, and it's probably worth R2. 5 million now. It's been my primary residence up till now, so I know I won't pay capital gains tax on it if I sell it right now. But what happens if I instead buy a new house to live in, and keep my flat to rent out (so it becomes my secondary residence)? Say I sell the flat in 3 years for R3. 5 million. Would the capital gains tax be calculated by subtracting R1 million from R3. 5 million to get R2. 5 million, even though for 7 or the 10 years I owned it it was my primary residence?
You would apportion the gain between the period you used the residence for your home and the rental period. The 2.5m will be apportioned between 7 and 3 years and the primary exclusion would apply to the R1.75m of the primary residence portion.
Chrissays: 3 February 2015 at 8:19
Thank you!! So is it just as if I have two flats, one of 70% of the value which is my residence, and the other of 30% of the value which isn't?
So is it exactly the same calculation if instead for ten years I use 30% of my floor space for my business?
Chrissays: 4 February 2015 at 11:33
Yes -- I mean, conceptually is it as if my one flat (value R2.5m) is divided into two separate assets, one of value 70% R2.5m and the other of value 30% R2.5m, and only the first one is my primary residence? And would this also be the case if the flat (value R2.5m) was my primary residence for 10 years but 30% of its floor space was used for my work?
TaxTimsays: 5 February 2015 at 8:30
It theory yes, you would apply the same logic to the property. You would always pay full CGT on the part of the house not used for primary residence purposes.
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