Updated SARS Guide Tightening CGT Rules for PBOs
This article will count 0.25 units (15 minutes) of unverifiable CPD. Remember to log these units under your membership profile.
When a PBO owns property, investments, or other assets, new tax rules could impact applicable capital gains tax (CGT) exemptions.
SARS issued an updated, sharper, more detailed Interpretation Note 44 (Issue 4). The note explains when a PBO can disregard capital gains or losses under Paragraph 63A of the Eighth Schedule. Here’s what’s changed:
🔍 What’s New?
Stricter Tests for Asset Use
SARS re-emphasises that at least 85% of an asset’s use must be for PBAs or qualifying trade. Anything less, and gains are taxable. A capital gain/loss is ignored if:
The asset wasn’t used in a business/trading activity, OR it was used “substantially the whole” (≈ 85%+) for:
Non-trade purposes (like PBAs), or
Permissible trading (related, occasional, or minister-approved activities).
Real-Life Examples, Finally!
The new IN includes real-world case studies, like halls let out part-time or mixed-use properties, showing when gains are exempt and when they’re not.
Capital Gains on Mixed-Use Assets
If your PBO lets out even a portion of a property for trade (e.g. rental income), SARS now applies proportional tests to see if you still qualify for CGT exemption. One wrong move = no exemption.
Clearer Valuation Date Rules
PBOs in existence before 1 April 2006 must have valued assets within 2 years of their CGT start date to use the market value method. Tables in the IN set out the exact cut-off dates.
What Stays the Same?
PBOs don’t pay CGT when assets are used mainly (85% or more) for public benefit activities (PBAs).
Permissible trade is still protected, meaning related trade, occasional fundraising, or minister-approved activities (though no ministerial approvals have been granted yet).
Investments “held” (like shares) and assets donated or bequeathed to a PBO remain exempt from CGT.
Bottom Line: What You Need to Do
Review how your PBO uses its assets
Document usage clearly, time, area, or other measurable basis
Check if valuations were done correctly (especially pre-2008 assets)
Get tax advice if you’ve got mixed-use property or trade income.
