Strong Markets Mean Bigger CGT Bills Ahead

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The Johannesburg Stock Exchange (JSE) and global indices have run hard over the past year. That means many of your clients are sitting on unrealised capital gains they have never had to think about. Until they sell. Capital Gains Tax (CGT) is only triggered on disposal. That makes the timing of a sale the single biggest planning lever you have. Here is a plain language refresher of how SA CGT works in 2026, and the questions to put on your interim review checklist for two client groups in particular.

How SA CGT Works

CGT is not a separate tax. It is a portion of a capital gain that gets folded into your client's normal taxable income. For an individual, the calculation is:

Capital gain x 40% inclusion rate x marginal tax rate

At the top marginal rate of 45%, with an effective CGT rate of 18%. That makes CGT cheaper than income tax, but only if you trigger it deliberately, in the right year, and after using every exclusion that applies.

The 2026 Budget, generally effective from 1 March 2026, lifted three key exclusions:

• Annual exclusion for individuals: R50,000 (up from R40,000).

• Primary residence exclusion: R3 million of the gain (up from R2 million).

• Small business exclusion for clients aged 55 or older: R2.7 million lifetime (up from R1.8m), and the business net asset value threshold rises to R15 million (up from R10m).

• Year-of-death annual exclusion remains R440,000.

Inclusion rates and the trust rate did not change. Trusts still pay an effective 36%. Companies still pay an effective 21.6%.

The Two Client Groups to Watch

• Retirement-age clients (55 and over)

  These clients are often sitting on a stacked balance sheet: a holiday home, a long-held share portfolio, a small business, and maybe a unit trust started decades ago. They are also approaching or in the income phase where their marginal rate may drop. That combination creates the single biggest CGT planning opportunity in SA law. Questions to raise during interim reviews:

  • Are you planning to sell the small business? If so, the R2.7 million lifetime exclusion is on the table where the qualifying small business requirements are met, including age, active involvement, and minimum ownership period tests. The numbers can save more than R400,000 in CGT on a typical mid-sized disposal.

  • Are you planning a phased disposal of a share portfolio? Spreading sales across tax years uses the R50,000 annual exclusion more than once and keeps marginal rates manageable.

  • Is there a year coming up with materially lower taxable income? Retirement transitions, gap years, sabbaticals, or business wind-downs are the cheapest years to crystallise gains.

  • Have we modelled the estate impact? Death is a CGT disposal event. Death generally triggers a deemed CGT disposal at market value, meaning unrealised gains may become taxable in the deceased’s final tax return Triggering some during life, at a lower marginal rate, often beats waiting.

• Second-property owners

  Second homes, holiday cottages, and rental properties are where the biggest surprises hit. Many clients assume property is "tax-free like my house". It is not. The R3 million primary residence exclusion only applies to the home they actually live in. A second property gets nothing but the R50,000 annual exclusion.

  Questions to raise:

  • What is the base cost? Original purchase price plus transfer duty plus every documented improvement (not maintenance). Many clients have lost the receipts. Help them rebuild the file before they sell, not after.

  • Has the property been rented? If it was the primary residence for part of the period and rented out for the rest, the gain is apportioned. The exclusion only covers the residential portion.

  • Is the property in the right name? Inter-spouse transfers are CGT-neutral. Inter-spouse transfers may qualify for CGT rollover relief, and in some cases ownership restructuring before disposal can improve overall tax efficiency.

  • Are there capital losses elsewhere? Capital losses realised in the same tax year can be set off against capital gains before the net gain is taxed.

  • Have we modelled a phased sale? A high-value second property cannot be sliced up, but the proceeds can be reinvested in a way that smooths future disposals.

The One Question to Ask Every Client

For every client with material market exposure, the question for the interim review is the same:

"If I had to sell today, what would the CGT bill be?"

Most clients have no idea. Running the number is a 30-minute exercise. It surfaces three things: whether base cost records exist, whether exclusions are being used, and whether the client is mentally ready for the tax that lands when they finally sell. That conversation is also the cleanest way to justify ongoing advisory fees.

Article Sources: Moneyweb