The Oracle
Posted 30 January 2015 - 02:24 PM
Using the Weighted Average method is simpler than the FIFO method and over time, if you add, it will increase the base cost.
It is very important to keep updating your purchases and file your Contract Note. I keep a file for each share I have. SARS will want to see that.
Edited by Orca, 30 January 2015 - 02:29 PM.
I started here with nothing and still have most of it left.
Advanced Member
Posted 30 January 2015 - 02:05 PM
SARS allows weighted average cost.
Even though the last trade falls within the 3 year? . What's to stop me buying a huge amount of shares just be selling?
So I buy 5 shares at R10. After 4 years I decide to sell - but the share is now R40. I buy 20 more at R40 a few months before selling all at R45
I would be very interested if the took the whole lot at CGT at an average of R34
Doesn't sound right
Newbie
Posted 30 January 2015 - 01:46 PM
can anyone answer this:
Year 1 buy share at R1 x 100
Year 2 nothing
Year 3 buy share at R1.5 x 100 (You now have 200 x avg 1.25)
Year 4 sell 100 shares at R2
Will they work capital gains on R1 or R1,25 or say it falls as income.
I do not think you could get away with R1.25 cost unless you sell in year 6
Might it work on last in first out?
So if you sold 140 in year 4 - then the 100 at CGT and 40 at income rate.?
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Interesting idea on buying and selling to get you avg cost up - took me a while to get it. would be interested to see it worked out including trading fees to see how much it would be worth.
SARS allows weighted average cost.
Advanced Member
Posted 30 January 2015 - 11:21 AM
can anyone answer this:
Year 1 buy share at R1 x 100
Year 2 nothing
Year 3 buy share at R1.5 x 100 (You now have 200 x avg 1.25)
Year 4 sell 100 shares at R2
Will they work capital gains on R1 or R1,25 or say it falls as income.
I do not think you could get away with R1.25 cost unless you sell in year 6
Might it work on last in first out?
So if you sold 140 in year 4 - then the 100 at CGT and 40 at income rate.?
***********************************************
Interesting idea on buying and selling to get you avg cost up - took me a while to get it. would be interested to see it worked out including trading fees to see how much it would be worth.
Member
Posted 30 January 2015 - 10:04 AM
Yes I have APN, got at R90, and again at R 130...but my big problem is NPN...bought at R 200 and never again, going to pay tax there, so I want to sell out a portion end Feb, and buy in Mar again, saving CGT and making my avg cost higher, then as the years go by and Naspers keeps climbing I can save tax this way...better than holding for 20 more years..just imagine the CGT if you sell out then 
Little Master
Posted 30 January 2015 - 09:18 AM
Ah, so you would be holding for 3 years +. In that case ignore my previous posts.
You could also simply buy more shares from time to time, at higher prices assuming they appreciate year after year (like APN). That will increase the weighted average of your base cost.
Member
Posted 30 January 2015 - 09:05 AM
Thank you Orca
Most shares take about 3-4 years to double in value, so they will always be of capital nature, the thing I'm trying to work out, is if its better to sell the shares, realise the profit, pay as little tax as possible, and then rebuy the share again and hold for another 4-5 years, otherwise you end up with 1000% gain after 10-15 years and pay huge amount of tax,
The maximum effective rate of CGT is 13.3%
So if you buy R 100,000 shares and sell for R 1,100,000, your profit is R 1m and tax = R 133,000.00
So in a way Id prefer to save as much as possible.
Little Master
Posted 30 January 2015 - 08:30 AM
As far as I can see CGT rules, and thus the 30.000 annual exclusion would not apply in Ball's case as the stock was held for less than 3 years.
So the proceeds will be of a revenue nature and must be added to his taxable income.
The Oracle
Posted 29 January 2015 - 08:24 PM
Don't quite get your calculation but here is a simplified one.
Capital gain is R100 000.00
Less R30 000.00
= R70 000.00
33.3% of R70 000.00
= R23 310.00
This you add to your other income.
On the other hand if you have a capital loss then;
Capital loss is (R100 000.00)
Now you have to ADD R30 000.00
= (R70 000.00)
33.3% of (R70 000.00)
= (R23 310.00)
This you cannot deduct from your other income but can only use it to offset capital gains going forward.
The amounts in brackets are negative.
I started here with nothing and still have most of it left.
Little Master
Posted 29 January 2015 - 05:44 PM
Guys, do I understand this correctly?
The annual capital gain exclusion = R 30,000
The capital gains inclusion in taxable income = 33.3%
Lets say a person pays tax at 18%
Primary tax rebate for 2015 year = R 12,726.00
So lets say one wants to use this exclusion to save as much tax as possible, say you haven't sold or bought any shares during the year. Now you want to sell on 28 Feb 2015 and then buy again 1 Mar 2015.
On 28 Feb sell R 100,700.00 worth of shares for a profit.
Minus CGT exclusion =R 30,000
Included in taxable income = R 70,700.00
Tax @ 18% = R 12,726.00
Minus primary rebate = R 12,726.00
Tax paid = R 0.00
Now on 1 Mar I just buy the same shares back for R 100,700. And this can be carried forward to following years? And all you pay for this exercise is brokerage and maybe the spread you lose if the stock goes up more than you sold it for.
Why mention the inclusion rate at all ? The R30,000 exclusion rate would imho only apply if you held the shares for 3+ years. Otherwise the entire profit is added to your taxable income.
Member
Posted 29 January 2015 - 04:43 PM
Guys, do I understand this correctly?
The annual capital gain exclusion = R 30,000
The capital gains inclusion in taxable income = 33.3%
Lets say a person pays tax at 18%
Primary tax rebate for 2015 year = R 12,726.00
So lets say one wants to use this exclusion to save as much tax as possible, say you haven't sold or bought any shares during the year. Now you want to sell on 28 Feb 2015 and then buy again 1 Mar 2015.
On 28 Feb sell R 100,700.00 worth of shares for a profit.
Minus CGT exclusion =R 30,000
Included in taxable income = R 70,700.00
Tax @ 18% = R 12,726.00
Minus primary rebate = R 12,726.00
Tax paid = R 0.00
Now on 1 Mar I just buy the same shares back for R 100,700. And this can be carried forward to following years? And all you pay for this exercise is brokerage and maybe the spread you lose if the stock goes up more than you sold it for.
Member
Posted 29 January 2015 - 08:48 AM
Correct. He seems quite sure and he mentioned it yesterday openly. That will bring us on par with Canada that I think has the highest CGT in the world.
And on that note, today on moneyweb: http://www.moneyweb....ax-be-increased
My posts are my opinion and shouldn't be seen as investment advise from me or the view of the organisation I work for.
Do your own research before engaging in trades/investments 
The Oracle
Posted 27 January 2015 - 03:53 PM
OK thanks Orca, will make a note of it.
Is that the same guy who you mentioned below Hugo ...?
Correct. He seems quite sure and he mentioned it yesterday openly. That will bring us on par with Canada that I think has the highest CGT in the world.
Edited by Orca, 27 January 2015 - 03:54 PM.
I started here with nothing and still have most of it left.
Sage
Posted 27 January 2015 - 01:28 PM
OK thanks Orca, will make a note of it.
Is that the same guy who you mentioned below Hugo ...?
Anyone need a heads up...!
The Oracle
Posted 27 January 2015 - 11:41 AM
Typical scare mongering by an Ex-pat.
Them chicks in Portugal still not shave...?
I don't know any expats. That came from a Charted Accountant that works with SARS. Not for SARS but as a trainer and consultant.
As to the chicks here not shaving. You will be surprised how sophisticated and well dressed they are.
I started here with nothing and still have most of it left.
The Oracle
Posted 27 January 2015 - 11:33 AM
Isn't that higher than income tax? Unless they planning on increasing that too...
No because 50% after the R30k deduction is added to your normal income so the effective tax is much less.
I started here with nothing and still have most of it left.
Sage
Posted 27 January 2015 - 09:15 AM
CGT might increase to 50%. Budget speech on 25 Feb. Watch this space.
Typical scare mongering by an Ex-pat.
Them chicks in Portugal still not shave...?
Anyone need a heads up...!
The Punter
Posted 27 January 2015 - 03:56 AM
Isn't that higher than income tax? Unless they planning on increasing that too...CGT might increase to 50%. Budget speech on 25 Feb. Watch this space.
The Oracle
Posted 26 January 2015 - 11:54 PM
CGT might increase to 50%. Budget speech on 25 Feb. Watch this space.
I started here with nothing and still have most of it left.
The Oracle
Posted 08 January 2015 - 12:25 AM
I must add this as I have been in touch with Hugo van Zyl who is a Charted Accountant and registered with SARS as a Master Tax Consultant and lectures SARS staff on tax matters.
My concern was Exit Tax that could have amounted to 40% of my gains. Not so, he replied. No exit tax once you have done the correct exit procedure via SARS and SARB.
No doubt SARS will now leave me alone as Hugo said he will intervene on my behalf if any probs. What a good guy and never charged me.
I started here with nothing and still have most of it left.
